Ralph W. Fullerton Company v. United States

Appellant taxpayer has brought this suit for refund of federal income taxes plus interest for the years 1969 and 1970 in the total sum of $13,888.50. It has taken this appeal from judgment of the district court in favor of the United States. Presented is the question of its right to take a loss deduction for accounts that formed part of a purchased customer list where the customer subsequently ceased or refrained from doing business with the taxpayer, or, alternatively, its right to take a depreciation deduction.

Taxpayer is a Portland, Oregon, corporation dealing in insurance. In 1968 it purchased all the capital stock of James A. Rossman Company, another Portland insurance company, for $125,000. The purchase price was allocated as follows by the parties to the sale: (1) $5,000 for bank accounts, accounts receivable, reserve for bad debts, furniture, fixtures and equipment; (2) $111,100 for the “accounts, files and dailies of each insured as listed and individually priced * * * (3) $8,900 for goodwill.

In 1969 and 1970 taxpayer ascertained which of the purchased accounts had ceased doing business with it, and on its income tax return deducted, as a loss under § 165(a) of the…