Willamette Industries, Inc. v. Commissioner

Willamette Industries (plaintiff) grew trees commercially, and some were damaged by insects and weather before reaching maturity; rather than letting them go to waste or selling them unprocessed, Willamette harvested the damaged trees early and processed and sold the resulting products as though the trees had matured normally. Willamette treated this as an involuntary conversion under Internal Revenue Code section 1033, seeking to defer some of the resulting taxable gain, but the Commissioner (defendant) determined no involuntary conversion occurred because Willamette processed and sold the trees in the usual course rather than selling them unprocessed, and Willamette petitioned the Tax Court.

Whether a federal taxpayer may defer taxes on gain from an asset that is involuntarily damaged and rendered unavailable for its intended use, even without directly replacing or first selling the damaged asset.