Ah Pah Redwood Company, a Corporation v. Commissioner of Internal Revenue

This matter is before us on a taxpayer’s petition to review a decision of the Tax Court of the United States. In that decision, reported at 26 T.C. 1197 , the tax court upheld a $38,304.21 income tax deficiency determination by the Commissioner of Internal Revenue, covering the calendar years 1948 and 1949.

In reaching this decision, the tax court held that the petitioner, Ah Pah Redwood Company, was not entitled to treat as long-term capital gains the receipts from the sale of timber cut and removed from its property by Coast Redwood Company between April 1948 and the end of 1949. The correctness of this ruling presents one of the two questions submitted for our consideration.

The facts to be considered in determining this question are undisputed. On December 13, 1946, Sage Land & Lumber Company, Inc., (seller) and Union Bond & Trust Company (buyer) entered into a contract for the sale and purchase of certain timberland situated in Humboldt county, California. In October, 1947, immediately after its organization as a corporation, petitioner purchased all of the right, title, and interest of Union Bond & Trust Company in this contract. Petitioner, according to the stipulated…