Sunset Fuel Co., an Oregon Corporation v. United States

The government appeals from a judgment of the district court granting the Taxpayer’s claim for a refund disallowed by the Commissioner.

The validity of the loss deduction, 26 U.S.C. § 165 , upon which the claimed refund is based, turns upon the following facts:

Taxpayer, a distributor of fuel oil, entered into an agreement with another local distributor of fuel oil, Dwyer, giving Taxpayer an option, insofar as here relevant, to purchase the names of Dwyer’s fuel oil customers for $58,920. The option recites:

Taxpayer exercised the option and received in return the list of Dwyer’s customers (some 1,778 names). Taxpayer thereafter solicited Dwyer’s customers, who had terminable-at-will delivery arrangements, and succeeded in obtaining the fuel oil business of many.

However, a number of Dwyer’s customers did not commence or discontinued doing business with Taxpayer. In the three months between the purchase of the list and the close of Taxpayer’s fiscal year, 523 list customers discontinued ordering; the following year another 268' former Dwyer customers followed suit. Taxpayer claimed the portion of the price paid Dwyer for the list allocable to those lost customers as a…