Since the Commissioner has elected not to appeal the Tax Court's finding adverse to the government, we the Tax Court's findings sustaining the Commissioner's determinations. As to these we note at the outset that the Commissioner's determinations are to be set aside only if "unreasonable, arbitrary, or capricious," in the case of § 482 allocations, Wisconsin Big Boy Corp., v. C.I.R. 452 F.2d 137, 140 (7th Cir. 1971); Philipp Bros. Chemicals, Inc. v. C.I.R. 435 F.2d 53, 57 (2d Cir. 1970), and only if "clearly erroneous" in the case of denials of surtax exemptions under § 269, Dorba Homes, Inc. v. C.I.R., 403 F.2d 502, 505 (2d Cir. 1968), J.T. Slocomb Co. v. C.I.R., 334 F.2d 269, 273-274 (2d Cir. 1964). The Commissioner has filed a protective cross-appeal requesting that, in the event we reverse the Commissioner's § 482 determinations as to Chef Foods and Your Host Bakery, we remand to the Tax Court for consideration of the Commissioner's § 269 determinations with respect to both companies.
Subsequent to the oral argument in this case, the Second and Fifth Circuits have joined the courts applying the subsection to the surtax exemption; however, in neither court was the applicability of the provision challenged. Dorba Homes, Inc. v. Commissioner of Internal Revenue, 403 F.2d 502 (2d Cir. 1968); Airport Grove Corp. v. United States, 408 F.2d 870 (5th Cir. 1969); Green Light Co. v. United States, 405 F.2d 1068 (5th Cir. 1968). During the taxable period involved in this case, section 1551 provided in part:
Welch v. Helvering, 290 U.S. 111, 115, 54 S.Ct. 8, 78 L.Ed. 212 (1933). Green Light Co. v. United States, 405 F.2d 1068, 1070 (5th Cir. 1968); Dorba Homes, Inc. v. Commissioner of Internal Revenue, 403 F.2d 502, 505 (2d Cir. 1968). Classical analysis would probably deem the general desire to make money a motive rather than a purpose.
We are not prepared to employ broad principles to frustrate specific statutory language. See Dorba Homes, Inc. v. Commissioner of Internal Revenue, 2 Cir. 1968, 403 F.2d 502, 506. For similar reasons we are unpersuaded by the Government's further contention that permitting Supreme to use an allocable cost basis would subvert the general principles of installment accounting. The Government also contended below that the provisions of § 1001(d) of the Code forbid application of § 334(b)(2) in this case.
Cf. sec. 999(b)(1). See also Dorba Homes, Inc. v. Commissioner, 403 F.2d 502, 506 (2d Cir. 1968), affg. in part and revg. in part T.C. Memo. 1967-150; B. Bittker & J. Eustice, Federal Income Taxation of Corporations and Shareholders, pp. 16-41—-16-42 (4th ed. 1979) (in respect of sec. 269); Rev. Rul. 56-613, 1956-2 C.B. 212 (in respect of sec. 368(c)). Respondent further argues that the statute refers to “other proprietors” as well as to shareholders.
S. Rept. No. 2375, 81st Cong., 2d Sess. (1950), 1950-2 C.B. 533-534. See Dorba Homes, Inc., T.C. Memo 1967-150, partially reversed on other grounds, 403 F.2d 502 (C.A. 2, 1968), which indicates that this approach does not automatically lead to upholding a reallocation under sec. 482 but rather calls for a review of the facts of each case. The normal tax rate is made applicable to the entire normal tax net income of all corporations; the surtax rate applies to the corporation surtax net income in excess of $25,000.
S. Rept. No. 2375, 81st Cong., 2d Sess. (1950), 1950-2 C.B. 533-534. See Dorba Homes, Inc., T.C. Memo 1967-150, partially reversed on other grounds, 403 F.2d 502 (C.A. 2, 1968), which indicates that this approach does not automatically lead to upholding a reallocation under sec. 482 but rather calls for a review of the facts of each case. The subfranchise contract provided that the sublicensees would pay WBB an administration fee at the end of each 4-week period.