- 33 -
distinguishable from the facts and question before us. In Reese,
the Court of Appeals was asked to conclude (and did conclude)
that the taxpayer’s venture into real property construction never
amounted to the conduct of a trade or business. Here, on the
deemed liquidation of H&C, Dover UK is deemed to have received
the assets of what undeniably was an ongoing business. The
question is whether that business was ever conducted by Dover UK.
Reese does not answer that question.13
b. Ouderkirk v. Commissioner and Azar Nut Co.
v. Commissioner
Ouderkirk v. Commissioner, T.C. Memo. 1977-120, involved an
individual who, in connection with the liquidation of a
corporation, received 7,700 acres of cut-over timberland and an
obsolete and inefficient sawmill, both of which the taxpayer
contributed to a partnership owned by him and his wife. After
refurbishment, the sawmill was placed in operation. Over an 11-
year period, approximately 80 percent of the timber processed by
the sawmill was acquired from sources outside the 7,700 acres of
timberland owned by the partnership. At the end of that period,
the partnership sold the sawmill at a loss (which it reported,
13 The position of the Court of Appeals for the Fifth
Circuit in Reese v. Commissioner, 615 F.2d 226 (5th Cir. 1980),
affg. T.C. Memo. 1976-275, that a single nonrecurring venture
ordinarily will not be considered a trade or business, has been
referred to as the “one-bite” rule, a rule that has been
specifically rejected by this Court. See Cottle v. Commissioner,
89 T.C. 467, 488 (1987); Morley v. Commissioner, 87 T.C. 1206,
1211 (1986); S&H, Inc. v. Commissioner, 78 T.C. 234, 244 (1982).
Page: Previous 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 NextLast modified: May 25, 2011