Peter Pan Seafoods, Inc. v. United States

Peter Pan Seafoods, Inc. appeals from a judgment which denied its claim for refund of federal income taxes. The district court’s opinion is found at 272 F.Supp. 888 . Our statement of the facts is more abbreviated than that of the district court, from which further details may be ascertained. In its refund action Peter Pan sought to recover $286,886.26 assessed and collected by the Commissioner of Internal Revenue for the taxable years ending March 31, 1960, and March 31, 1961. The Commissioner’s assessment was based upon reeomputation of income for the tax year ending March 31, 1957, which thereby reduced operating losses that could otherwise have been carried forward. Involved are the consequences of an acquisition by another company of two mortgage notes previously issued by the taxpayer. We reverse.

The Commissioner successfully contended below that (1) the notes were in substance acquired by the taxpayer and that, therefore, the taxpayer realized income as a result of cancellation of its own indebtedness, and (2) the operating loss carry-forward deductions claimed by the taxpayer were disallowable under Section 269(a) of the Internal Revenue Code of 1954 as an acquisition…