United States v. The Times-Mirror Company, a Corporation

On October 21, 1949, taxpayer, The Times-Mirror Company, paid excess profits taxes for the calendar years 1943 and 1944 in the sum of $62,357.30 plus interest. Claims for refund on the ground that expenditures for microfilming past issues of a newspaper in an emergency were current expenses were timely filed and were rejected. On November 20, 1952, taxpayer brought action in the District Court for claimed over-payments. The pre-trial order, approved by the attorneys for the respective parties and signed by the trial judge, sets out the issue as follows:

The parties are in agreement that the District Court found facts substantially as follows:

The question presented is: Whether the findings of the District Court that the cost to taxpayer of microfilming its file of back issues of newspapers was an ordinary and necessary business expense were supported by substantial evidence and were not clearly erroneous ?

The question before us is one of mixed law and fact. There is no disagreement between the litigants as to the circumstances which are relevant to the determination. The basic facts are uncontroverted and are clearly established in the record. Congeries of facts may, however,…

(dissenting).

The outstanding and incontrovertible circumstance of this case is that the trial court misunderstood and misapplied the law which determines and defines the difference between “capital expenditures” and “ordinary and necessary expenses”. Neither the trial court’s conclusions nor this court’s opinion even mentions the applicable legal standards, established by a long line of decisions. There is not the slightest question of fact in this case. Exactly what happened, and what was done, is not in dispute between the parties. 1 The court’s key finding was its No. IX as follows:

This discloses a complete misapprehension of the true test as to what constitutes a capital expenditure. That test, as stated in the leading case of Parkersburg Iron & Steel Co. v. Burnet, 4 Cir., 48 F.2d 163, 165 , is not whether the expenditures in question increased the productivity or capacity of the plant; it is not whether it results in ultimate or any advantage to the taxpayer; nor is it whether it increases the value of the property. “The true test is rather the nature of the expenditure in and of itself.” This court said the same thing in Crocker First Nat. Bank of San Francisco v.…

231 F.2d 876 UNITED STATES of America, Appellant, v. The TIMES-MIRROR COMPANY, a corporation, Appellee. No. 14582. United States Court of Appeals Ninth Circuit. February 29, 1956. H. Brian Holland, Asst. Atty. Gen., Ellis N. Slack, Hilbert P. Zarky, David O. Walter, Sp. Assts. to Atty. Gen., Laughlin E. Waters, U. S. Atty., Edward R. McHale, Robert H. Wyshak, Asst. U. S. Attys., Los Angeles, Cal., for appellant. MacKay, McGregor, Reynolds & Bennion, Adam Y. Bennion, A. Calder MacKay, Stafford R. Grady, Los Angeles, Cal., for appellee. Before STEPHENS, POPE and FEE, Circuit Judges. JAMES ALGER FEE, Circuit Judge. 1 On October 21, 1949, taxpayer, The Times-Mirror Company, paid excess profits taxes for the calendar years 1943 and 1944 in the sum of $62,357.30 plus interest. Claims for refund on the ground that expenditures for microfilming past issues of a newspaper in an emergency were current expenses were timely filed and were rejected. On November 20, 1952, taxpayer brought action in the District Court for claimed over-payments. The pre-trial order, approved by the attorneys for the respective parties and signed by the trial judge, sets out the issue as follows: 2 "Were the…