Stanley B. Rose, and June Rose, Husband and Wife v. United States

This is an appeal from a summary judgment of the United States District Court dismissing appellants’ suit for a refund of income taxes allegedly overpaid for 1969. The issue presented is whether the district court was correct in finding that it is not necessary for the Government to prove a tax-avoidance motive in order to treat as a corporate reorganization under § 368(a)(1)(D) of the Internal Revenue Code of 1954 a transaction that taxpayers have characterized as a liquidation. We agree with the district court and affirm the judgment.

1. Facts

Appellants Stanley and June Rose owned all of the shares of capital stock of two corporations, Port Dry Kiln Company (Port Dry Kiln) and Exeter Lumber Sales Company (Exeter). Stanley Rose was president of both corporations, and Stanley Rose, June Rose and Jerry Houston constituted the board of directors of both corporations during all relevant years.

Exeter was incorporated in 1955 and operated a sawmill. In January 1962, appellants organized Port Dry Kiln for the purpose of drying the lumber produced by Exeter. Port Dry Kiln’s facilities consisted of two dry kilns constructed by the Port of Longview, a Washington State municipal…