Smc Corporation v. United States

This income tax case was heard and decided upon stipulated facts as follows. The question at issue was were the shredder and crane “placed in service” prior to the close of plaintiff’s fiscal year ending July 31, 1975, within the meaning of 46(c)(1) of the Internal Revenue Code of 1954 and Treasury Regulation § 1.167(a)(10)(b).

The District Court decided this question in reliance on Sears Oil Co. v. Commissioner, 359 F.2d 191 (2nd Cir. 1966). In that case a barge had been delivered to the taxpayer but not actually put into use until the end of the tax year because the barge was frozen into a canal. The Second Circuit disagreed with the Tax Court primarily because it found it appropriate “to reflect the gradual deterioration of the completed asset that was taking place during this period.”

In our instant case, the government has stipulated that both pieces of equipment herein involved were fully operational except for the connection of electric power lines by Georgia Power Company. The only impediment to the operation of this equipment was outside the control of the taxpayer. We affirm the decision of the District Court under which plaintiff SMC Corp. is allowed recovery of the sum of $147,371 with interest computed pursuant to the applicable provisions of the Internal Revenue Code.