
    ALPHA PORTLAND CEMENT CO. v. UNITED STATES.
    No. F-319.
    Court of Claims.
    Oct. 20, 1930.
    
      F. Carroll Taylor, of New York City (Louis H. Porter, of New York City, on the brief), for plaintiff.
    Ralph C. Williamson, of Washington, D. C., and Herman J. Galloway, Asst. Atty. Gen. (Ottamar Hamele, of Washington, D. C., on the brief), for the United States.
    Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.
   LITTLETON, Judge.

The Catskill Cement Company was affiliated with plaintiff and a consolidated profits tax return for 1917 was filed for this and other affiliated corporations.

The facts establish that the gas engine plant, including the building in which it was housed, was installed and constructed in 1914 at a cost to the Catskill Company of $454,-' 696.78. It was abandoned and its use discarded early in 1917 before the sale and transfer by the Catskill Company of its entire business and assets to the plaintiff on March 10,1917. The building, which was included in the aforementioned cost, had a fair market value of $24,850.60 at the time the gas power plant was abandoned and the gas engines and equipment had a salvage value at the time of the abandonment of $15,000. Therefore, upon the abandonment of the gas power plant, the Catskill Company sustained a loss of the difference between the original cost, less depreciation of 5 per cent, for two years on the gas engines and equipment, and the salvage value, or $369,376.51. This loss was in no sense intercompany and was therefore a proper deduction in determining the consolidated net income of the group for excess-profits tax purposes.

The fact that the power plant was erected and installed by the plaintiff which owned all the stock of the Catskill Company did not change the situation, since, at that time, the corporations were separate entities and the amount expended in construction and installation of the power plant was an expenditure by the Catskill Company. The fact that it borrowed the money from the plaintiff does not'change the situation. Legal ownership of all of the assets of the Catskill Company was in that company until the sale and transfer on March 10, 1917. The fact that the deeds recite that the transfer was effective as of January 1, 1917, is of no significance in connection with the question involved. The Catskill Company was not dissolved until November, 1918.

The above deduction, which we hold was allowable from the consolidated net income for excess-profits tax purposes, results in no excess-profits tax liability. The plaintiff is therefore entitled to recover, and judgment in ' its favor for $20,028.90, with interest, will be entered. It is so ordered.  