Stephens Marine, Inc., Successor in Interest to Stephens Brothers, Inc. v. Commissioner of Internal Revenue

The taxpayer, Stephens Marine, Inc. [Stephens Marine], successor in interest to Stephens Brothers, Inc. [Stephens Brothers] petitions for review of a Tax Court decision in favor of the Commissioner. T.C. Memo. 1969-89 . We affirm. The facts are set out at length by the Tax Court. The following summary will suffice here.

The taxpayer attacks certain deficiencies in the income taxes of Stephens Brothers, for its final fiscal year ending October 4, 1960. It was stipulated that “[o]n or about August 12, 1960, the outstanding stock of Stephens Brothers, Inc., was delivered to Sea Craft, Inc. On October 4, 1960, Sea Craft, Inc. changed its name to Stephens Marine, Inc., and liquidated Stephens Brothers, Inc. into itself. For federal income tax purposes, this liquidation was effected under the provisions of Section 334(b) (2).” Only three items are now in dispute. With respect to each, the Tax Court sustained the Commissioner’s deficiency.

A. The mine sweeper contracts.

The first two items in dispute involve a contract between Stephens Brothers and the Department of the Navy, Bureau of Ships, for the construction of three coastal minesweepers, numbers MSC 281, 282, and 283, for a…