## Facts

- Century Electric Company manufactured and sold electric motors and generators and was not a real-estate dealer.
- Century owned and used a foundry building and the land beneath it in its manufacturing business.
- On December 1, 1943, Century transferred the foundry and land to William Jewell College for $150,000.
- The transfer was accompanied by a long-term leaseback under which Century continued to possess and use the property for an extended period (25 to 95 years).
- Century claimed a large deductible loss on its 1943 return based on the difference between the property’s basis/value and the $150,000 received.
- The Commissioner disallowed the claimed loss; the Tax Court sustained the deficiency determination after making detailed factual findings that Century accepted as correct.
- The Tax Court findings reflected that Century was financially strong in 1943, with substantial sales and profits, liquid assets, and available bank credit, and was not compelled by financial necessity to dispose of the property.

## Issues

1. Whether the transfer-and-leaseback of the foundry to a charitable institution was a genuine sale producing a deductible loss, or a tax-motivated arrangement in which Century retained the property’s economic benefits.
2. Whether the Tax Court’s factual findings and resulting characterization of the transaction should be disturbed on appellate review.

## Decision

- The Eighth Circuit affirmed the Tax Court’s decision.
- The court upheld the Commissioner’s disallowance of the claimed loss.
- The court accepted that the Tax Court’s findings, and the inferences drawn from them, supported treating the arrangement as not producing a recognizable loss for tax purposes.

## Legal Principles

- Federal tax consequences depend on the substance and economic reality of a transaction, not merely its formal labels or documents.
- A claimed loss on a “sale” may be denied where the taxpayer, through a leaseback or similar arrangement, effectively retains the property’s practical benefits and use.
- Where the Tax Court’s detailed factual findings are accepted and reasonably support its transaction characterization, an appellate court will not overturn that determination.

## Conclusion

The court held that Century’s transfer of its foundry to a college with a long-term leaseback did not amount to a bona fide disposition giving rise to a deductible loss, and it affirmed the Tax Court’s decision sustaining the deficiency.


Century Elec. Co. v. Comm’r, 192 F.2d 155 (8th Cir. 1951)