Corn Products Refining Company v. Commissioner of Internal Revenue

PETITIONER: Corn Products Refining Company
RESPONDENT: Commissioner of Internal Revenue
LOCATION: Pittsburgh Party Headquarters

DOCKET NO.: 20
DECIDED BY: Warren Court (1955-1956)
LOWER COURT: United States Court of Appeals for the Second Circuit

CITATION: 350 US 46 (1955)
ARGUED: Oct 18, 1955
DECIDED: Nov 07, 1955

Facts of the case

Question

Media for Corn Products Refining Company v. Commissioner of Internal Revenue

Audio Transcription for Oral Argument - October 18, 1955 in Corn Products Refining Company v. Commissioner of Internal Revenue

Earl Warren:

Number 20 on the docket, Corn Products Refining Company versus Commissioner of Internal Revenue.

Mr. Kramer.

Jay O. Kramer:

May it please the Court.

We've asked the marshal to bring in an easel and a chart which we will use during the course --

Yes.

-- of this case to illustrate certain points.

This case comes before the Supreme Court on certiorari to the Second Circuit.

It involves income and excess profits taxes for the years 1940 and 1942.

The actions for both those years were previously consolidated and it appears as one proceeding here.

The order of certiorari has limited the review by this Court to two points.

The first point, which I will discuss, involves the following question where petitioner's transactions in commodity futures, which are not true hedges, subject to the capital gain and loss treatment of Section 117 (a) of the Internal Revenue Code of 1939.

Well, were they are ordinary gains and losses and to be treated the same.Point two which Mr. McCain will discuss is an entirely distinct point.

That point is -- are commodity futures securities within the meaning of Section 118 of the Internal Revenue Code of 1939 and subject to the so-called wash sales provisions thereof.

As I have stated, I will address myself solely to the first point.

The facts with respect to this issue are conceded.

They start or are caused by the great drought of 1934 and 1936.

These severe droughts caused a great shortage of corn in our midwestern farming areas.

The result of that was that the price of corn rose substantially during the years 1934, 1935, 1936 and 1937.

Now, the petitioner here is a nationally known processor of raw corn, perhaps the largest in the country.

Petitioner's main products consist primarily of starch, corn syrup, and cerelose, which is a refined corn sugar.

Its byproducts are feed and corn oil.

Now, cerelose, the refined corn sugar competes with cane and beet sugar.

It is used in canning, candy and other commercial uses.

The great droughts of 1934 and 1936 as I have stated caused the price of corn to rise and therefore the price of petitioner's product, cerelose.

The result was that petitioner actually lost money during 1937 on every sale of cerelose.

It had risen out of line with the price of cane sugar and beet sugar because Your Honors will recognize that the same area affected by the drought with respect to corn was not necessarily affected with respect to raising of cane sugar or beet sugar.

Petitioner was faced with a serious situation.

Its annual grind in those years about 35 million bushels and rose gradually during the years here in question to almost -- to over 60 million bushels in 1942.

Petitioner could only store 2,300,000 bushels in its facilities.

This is equivalent to about three weeks grind.