Paramount Pest Control Service, a Corporation v. United States

In this taxpayer’s suit for the recovery of federal income and excess profits taxes for 1953 and 1954, paid pursuant to the deficiency determination by the District Director of Internal Revenue, both parties made motions for summary judgment. The District Court granted the Government’s motion and the taxpayer has appealed.

Taxpayer is presently engaged in the structural pest control business in the San Francisco Bay Area; prior to 1953 it also maintained staffed and outfitted branch offices in other localities where it carried on business under its corporate name Paramount Pest Control Service, Inc.; during and between the years 1948 and 1953 it transferred all these outlying establishments to the various managers of those branches. There were-eight of these transactions, each of which was evidenced by a written agreement.

In computing its taxable income, taxpayer dealt with certain of the sums paid by the transferees as proceeds from the sale of capital assets, but the District Director, concluding that the transactions in fact were leases and not sales of the several businesses, held that the payments constituted ordinary income not eligible for preferred tax treatment.

The…