Lucile McAulay Filippini, as of the Last Will and Testament of Carra McAulay Deceased v. United States

Taxpayer sought to recover income tax paid on the gain resulting from a condemnation award, on the ground that the property which she had purchased to replace the condemned property was “similar or related in service or use to the [condemned] property” within the meaning of Section 112(f) (3) (A) of the Internal Revenue Code of 1939, and the gain therefore qualified for non-rec ognition. The District Court denied relief.

Six Courts of Appeals have recently considered the application of Section 112 (f) (3) (A) of the 1939 Code (or the identical language of Section 1033(a) (3) (A) of the 1954 Code), to' taxpayers who, like the taxpayer in the present case, leased both the condemned and the replacement property to others to produce rental income. The relevant legal materials are fully explored in these decisions and in the opinion of the District Court in the present case, and we need not repeat that process here. In our view these materials support the following general conclusions.

The purpose of the statute is to relieve the taxpayer of unanticipated tax liability arising from involuntary condemnation of his property, by freeing him from such liability to the extent that he…