Libson Shops, Inc. v. Koehler

PETITIONER: Libson Shops, Inc.
LOCATION: California State Capitol

DECIDED BY: Warren Court (1957-1958)
LOWER COURT: United States Court of Appeals for the Eighth Circuit

CITATION: 353 US 382 (1957)
ARGUED: Jan 15, 1957
DECIDED: May 27, 1957

Facts of the case


Media for Libson Shops, Inc. v. Koehler

Audio Transcription for Oral Argument - January 15, 1957 in Libson Shops, Inc. v. Koehler

Earl Warren:

Libson Shops (Inaudible) Officer Gustave F. Koehler et al., Mr. Lowenhaupt, and before you start with your argument, I want to announce that in the order list yesterday there was a -- a mistake.

Application had -- petitioner had been made to file to two briefs, one in 216 and one in 64.

And the order list shows that the request was granted in 216 but was denied in 64.

That is a mistake.

We -- we intended to grant permission also in 64 so that may be filed and counsel may respond if they desire to it.

Now, you may proceed, Mr. --

Henry C. Lowenhaupt:

May it please the Court.

I'm glad to move now from a somewhat tempestuous area of, maybe, Karl -- Karl Marx to that which may be a little calmer, the sphere of Adam Smith.

This case involves a question of the taxation of income that comes to this Court from the Court of Appeals for the Eighth Circuit.

The precise question presented is whether or not the petitioner here, the surviving corporation in a merger, may carry over and deduct from its income the operating losses of three corporations which were a component corporations in that merger.

The facts are stipulated, fully set out in the briefs, maybe summarized very briefly here.

Prior to 1949, there were 17 corporations, each with the name Libson as part of its name.

Some of them were Missouri corporations, some of them were Illinois corporations.

They conducted retail business in 16 locations.

The 17th corporation was a management company.

The stock of all the corporations was owned by the same individuals in identical proportions with one nsignificant exception, that one of the corporations was the wholly-owned subsidiary of another corporation.

That of course doesn't vary the substantial ownership of the corporations, all of which were owned in the same proportions, add identically.

Three of these corporations sustained net operating losses.

At the end of the fiscal year in 1949, all of the corporations were merged into one corporation under the statutory provisions of the Missouri and Illinois corporation loss of the states to their incorporation.

Petitioner here is the sole surviving corporation in that merger.

Of course, the fact that there were 17 corporations doesn't mean that there were 17 separate businesses.

There were 17 accounting units conducting business at 16 locations under one common management.

This appears to be but one business.

Basically, the fact that it was one business is the reason for the merger.

This petitioner deducted from its income consisting of the income of all the locations.

For the year following the merger, the net operating loss suffered in three of those locations which appeared in the accounts of its component corporation, three of its component corporations.

And the only question presented here is the propriety of that deduction.

Mr. Lowenhaupt, were the 17 corporations -- they all brought into being the same as to all four of them for the initial enterprise?

Henry C. Lowenhaupt:

No, as new locations were opened from time to time, new corporations were formed.

Many of them were organized at once succeeding to a -- a business conducted as sole proprietorship.