Beauchamp & Brown Groves Co. v. Commissioner of Internal Revenue

This is a taxpayer’s petition to review a decision of the Tax Court of the United States. ( 44 T.C. 117 .) The Tax Court had jurisdiction under 26 U.S.C. § 7442 . Our jurisdiction rests on 26 U.S.C. § 7482 .

Petitioner is a dissolved corporation which formerly operated an orange grove. For its fiscal years 1958 and 1959 it had taxable income and paid the proper amounts of tax thereon.

During its fiscal year 1960 the petitioner adopted a plan of dissolution and sold its orange grove at a substantial gain. Under the provisions of section 337 the gain was properly not recognized as income to the petitioner. Prior to the sale of the grove, however, the petitioner expended certain sums of money to grow oranges in the grove, the unharvested crop being sold with the land.

In its income tax return for the fiscal year 1960, the petitioner deducted the amounts expended on the crop as ordinary and necessary business expenses. This gave rise to an operating loss which the petitioner carried back to 1959 and 1958, obtaining refunds of part of the taxes paid for those years.

Thereafter the Commissioner disallowed the deductions for 1960 and notified the petitioner of the deficiencies for…