Texas Coca-Cola Bottling Co. v. Commissioner

Summary

The United States Board of Tax Appeals considered whether a corporation could deduct state and local real estate taxes paid in 1928 on property acquired from partnerships on March 1, 1928. Applying Texas law, the Board held that liability for the taxes accrued based on ownership as of January 1, 1928, before the corporation acquired the property. The taxes therefore became part of the corporation's cost basis in the property and were not deductible under section 23 of the Revenue Act of 1928; the deficiency determination was affirmed.

Holdings

1. The corporation could not deduct the $3,859.26 payment as an ordinary and necessary business expense because the taxes had accrued and become a lien based on ownership of the property on January 1, 1928, before the corporation acquired the property. The payment became part of the corporation's cost of the property.

Questions Presented

1. Whether a corporation that acquired Texas real property on March 1, 1928, could deduct as an ordinary and necessary business expense the 1928 state and local property taxes it paid on that property.

Disposition

affirmed