Central Tablet Mfg. Company v. United States

PETITIONER: Central Tablet Mfg. Company
RESPONDENT: United States
LOCATION: Dade County Circuit Court

DOCKET NO.: 73-593
DECIDED BY: Burger Court (1972-1975)
LOWER COURT: United States Court of Appeals for the Sixth Circuit

CITATION: 417 US 673 (1974)
ARGUED: Mar 25, 1974 / Mar 26, 1974
DECIDED: Jun 19, 1974

ADVOCATES:
Larry H. Snyder - for petitioner
Stuart A. Smith - for respondent

Facts of the case

Question

Media for Central Tablet Mfg. Company v. United States

Audio Transcription for Oral Argument - March 25, 1974 in Central Tablet Mfg. Company v. United States
Audio Transcription for Oral Argument - March 26, 1974 in Central Tablet Mfg. Company v. United States

Audio Transcription for Opinion Announcement - June 19, 1974 in Central Tablet Mfg. Company v. United States

Warren E. Burger:

The disposition of number 72-593, Central Tablet Company against The United States will be announced by Mr. Justice Blackmun.

Harry A. Blackmun:

Well this is an income tax case coming to us from the United States Court of Appeals for the Sixth Circuit.

Section 337 of the Federal Internal Revenue Code, provides that gain or loss to a corporation from a sale or exchange of property taking place during a twelve months period, following the corporation’s adoption of a plan of complete liquidation, is not to be recognized or in other words, is tax free to the corporation.

What happened here is that a fire largely destroyed the tax payer corporation’s plant in Ohio.

After the fire the corporation adopted a plan of liquidation.

There were extensive negotiations with the insurance companies that had provided the fire and business interruption insurance protection.

These loss claims were settled after the adoption of the plan of liquidation.

Thus chronologically we have the fire and then the adoption of the plan and during the ensuing year payment of the insurance proceeds.

The proceeds exceeded the corporation’s adjusted income tax basis and the destroyed property.

As a consequence there was gain, and the issue is whether that gain is to be allocated to a happening of a fire or to the settlement of the insurance claims during the year of following the adoption of the plan.

If the former, the gain is taxable to corporation, if the latter the gain under the statute is not recognized or taxed to the corporation.

The District Court followed a decision of a few years ago by the Eighth Circuit and entered judgment for the tax payer.

The Court of Appeals refused to follow the Eighth Circuit Opinion and reversed.

We affirm the Court of Appeals.

In an opinion filed today, we have endeavored to trace the history and purpose of the statute.

We have set forth our reasons for reaching our conclusion.

I am authorized to state that Mr. Justice White has filed a dissenting opinion and is joined therein by Mr. Justice Douglas, Mr. Justice Brennan and Mr. Justice Powell.

Warren E. Burger:

Thank you Mr. Justice Blackmun.