Republic Automotive Parts, Inc. v. Commissioner of Internal Revenue , 611 F.2d 645 ( 1979 )

611 F.2d 645

80-1 USTC P 9145

REPUBLIC AUTOMOTIVE PARTS, INC., Petitioner-Appellant,
v.
COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.

No. 78-1019.

United States Court of Appeals,
Sixth Circuit.

Dec. 18, 1979.

Sidney Bender, Leventritt, Lewittes & Bender, New York City, for petitioner-appellant.

M. Carr Ferguson, Asst. Atty. Gen., Gary R. Allen, Tax Division, U. S. Dept. of Justice, Gilbert E. Andrews, Daniel F. Ross, Stuart E. Seigel, Chief Counsel, I. R. S., Washington, D. C., for respondent-appellee.

Before EDWARDS, Chief Judge, and KEITH and KENNEDY, Circuit Judges.

ORDER

1

Appellant appeals from a decision of the United States Tax Court which upheld an IRS assessment of a tax deficiency. The deficiency found by the IRS was based upon its claim that a $400,000 judgment it had been awarded in a suit against Borg-Warner Corporation for wrongfully inducing a third party Maquinas York, a Brazilian manufacturer, to breach its contract with Republic was ordinary income rather than capital gain as reported by Republic.

2

We note that in affirming the $400,000 judgment in Republic's favor, the source of the judgment was described by the Seventh Circuit as follows:

3

The fundamental problem was to determine the reasonably probable amounts of royalties which York would have paid from time to time from 1959 to 1970, but for the wrongful inducement, and determine the present value, as of June, 1967, in dollars, of those periodic payments. Republic Gear Co. v. Borg-Warner Corp., 406 F.2d 57, 62 (7th Cir.), Cert. denied, 394 U.S. 1000, 89 S.Ct. 1596, 22 L.Ed.2d 777 (1969).

4

The loss of royalties is clearly loss of ordinary income. For this reason and other reasons spelled out in the opinion of the Tax Court, the judgment of the Tax Court is affirmed.