[DOWNLOAD] "Grace Bros. v. Commissioner Internal" by United States Court of Appeals Ninth Circuit. # Book PDF Kindle ePub Free

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Title: Grace Bros. v. Commissioner Internal
Author : United States Court of Appeals Ninth Circuit.
Release Date : January 18, 1949
Genre: Law,Books,Professional & Technical,
Pages : * pages
Size : 66 KB

Description

Petitioner is a California corporation which for many years was engaged in various enterprises, including farming, grape growing and the manufacture and sale of wines and beers. All its stock is owned by its president and manager, Joseph T. Grace. Between 1921 and 1943, it operated at Santa Rosa, Sonoma County, California, a winery known as the "DeTurk Winery". It sold, under the "DeTurk" label, wines and brandies from grapes grown by it or bought from others. Its wines were considered by the trade as of high quality. In 1942, it sold 114,046 gallons of dry wine in bulk and 7,028 gallons in bottles, at 22.2 cents per gallon, and 46,009 gallons of sweet wine in bulk and 10,268 gallons in bottles, at 36.8 cents a gallon. During the years 1936-1942, the investment in this portion of its business was $150,000, of which $60,000 represented the plant and $90,000 the inventory. The substantial inventory in stock is accounted for by the fact that wines must be held for aging. Late in 1942, Petitioner decided to discontinue its wine business. It, therefore, limited its production for that year to 4,959 gallons from its own grapes, as against a normal production of 200,000 gallons. Notwithstanding this, its entire inventory for that year was 522,761 gallons. In November, 1943, talks began with L. A. Weller, Vice-President of Garrett and Company, Inc., of New York. At no time did Weller show an interest in acquiring the physical properties of the DeTurk Winery by purchase. From the very beginning of the exchange of written communications, in a telegram dated December 28, 1942, the request of Garrett and Company was to submit details if "interested in selling your inventory and leasing winery." The Petitioner, on December 29, offered specified quantities of several types of wine at various prices per gallon and a lease "of winery, distillery, and bonded warehouse" for five years at an annual rental of $12,000.Agreement was finally confirmed by telegram of Garrett and Company, dated December 31, 1942. The price agreed on for all the wine was fifty cents per gallon, twenty per cent of the purchase price to be paid immediately. The lease for the winery was to be for five years, at an annual rental of ten thousand dollars. On the same day, 104,000 gallons were delivered, for which Garrett and Company paid $52,000, the profit from which the Petitioner reported in its 1942 income tax return. The balance of the wine, 418,761 gallons in all, was delivered in 1943. Petitioner received $124,317.50 for the dry wine and $94,862.41 for the sweet wine.A higher price than fifty cents per gallon was paid for the sweet wine, because 73,628 gallons had a higher sugar content than the California standard. Garrett and Company also agreed to purchase 600 wine barrels at $4.00 each. In view of the discussion to follow, it is interesting to note that although performance of the contract was begun on December 31, 1942, when $52,000 was paid, a formal memorandum of agreement, embodying the terms of the sale was not executed until January 20, 1943, and the lease not until January 30, 1943.This fact has singular significance, in view of the claim of unitary transfer made in this case. Following the execution of the formal lease, the Petitioner surrendered its permit to manufacture and sell wine, in order that Garrett and Company might procure a permit to operate a winery on the premises.The wine stocks, cooperage, labels, list of customers, and the small staff of eight or ten employees were taken over by the purchaser-lessee. Rent was paid under the lease until the end of April, 1944, when the lease was terminated by mutual agreement. On April 15, 1944, Petitioner sold the winery to Taylor & Co. for $150,000.