Before KERNER, LINDLEY, and SWAIM, Circuit Judges.
The question presented by this petition for review is whether the Tax Court correctly upheld the Commissioner's determination that in 1939 the taxpayer sustained a loss upon the sale of real estate which did not come within the scope of § 112(b)(1) of the Internal Revenue Code, 26 U.S.C.A. § 112(b), but was recognizable under § 112(a) thereof for the purpose of computing its excess profits tax credit based on an average base period net income.
The Tax Court held that the transaction was not an exchange protected from tax impact by § 112(b)(1) but was a sale which resulted in a recognizable loss. In this court taxpayer claims "no error with respect to the findings of facts of the Tax Court, but alleges that the Tax Court erred in applying the law to those facts." It makes the point that the payment of $64,500 cash in addition to the transfer of an old bottling plant as consideration for the construction of a new plant did not remove the transaction from the purview of § 112 (b)(1) of the Revenue Act of 1938.
The material facts are that in 1930 taxpayer, at a cost of $36,000, acquired a bottling plant in Bloomington, Illinois - allocating $30,500 to buildings and $5,500 to land. In 1938, concluding that the plant was inadequate for its needs, taxpayer decided to build a new plant. It decided it had no use for the old plant and wished to dispose of it. With those purposes in mind, it entered into a contract with a contractor to construct a new plant. The new plant was completed in 1939. By the contract the contractor furnished the necessary material and labor, and completed the building in accordance with the plans and specifications prepared by its architect for a total of $72,500. Of this sum the contractor was paid $64,500 in cash and accepted taxpayer's old buildings and the land upon which the old plant was located at a valuation of $8,000, and the old building and land were transferred to the contractor.
Taxpayer, in its 1939 2ncome tax return, reported the transaction thusly:
Lot, Cost July 1930 $5500.00
Sold April 30, 1939 1424.55
Building, Cost July 1930 30,500.00
Depreciation on building to April 30, 1939 5,113.21
Net book value April 30, 1939 25,386.79