Bloomington Coca-Cola Bottling Co. v. Commissioner

In 1930, Bloomington Coca-Cola Bottling Company (taxpayer) acquired a bottling plant in Bloomington, Illinois for $36,000, allocating $30,500 to the building and $5,500 to the land. By 1938, concluding the plant was inadequate, the taxpayer decided to build a new plant and contracted with a builder to construct it for $72,500 total; the builder was paid $64,500 in cash and, in addition, received the taxpayer's old plant and land, valued at $8,000. The taxpayer claimed a loss on this 1939 disposition of its old plant. In computing the taxpayer's excess profits tax for 1943 and 1944, the Commissioner of Internal Revenue determined that the transaction was a taxable sale rather than a tax-deferred like-kind exchange under section 112(b)(1) of the Internal Revenue Code, and disallowed the loss accordingly, producing tax deficiencies of $8,049.19 and $8,492.13. The Tax Court sustained the Commissioner's determination, and the taxpayer petitioned for review.