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Joseph M. Collins, Petitioner, v. Commissioner of Internal Revenue, RespondentCollins v. CommissionerDocket Nos. 69165, 69166June 27, 1960, Filed
United States Tax Court *120
Decisions will be entered under Rule 50 .Petitioner's ownership and operation of the Boston Yanks and the New York Bulldogs, professional football teams, under different franchises and in different but successive years,
held , to constitute separate business within the meaning ofsection 130, I.R.C. 1939 , and losses of the Yanks cannot be tacked on to losses of the Bulldogs and its successor to permit disallowance of losses in excess of $ 50,000 attributable to a trade or business carried on for 5 consecutive years undersection 130 .Richard Z. Steinhaus, Esq ., andNathan Goodman, Esq ., for the petitioner.John J. O'Toole, Esq ., for the respondent.Drennen,Judge .DRENNEN*592 Respondent determined deficiencies in income tax of petitioner as follows: *121
Docket No. Year Deficiency 1945 $ 6,170.46 69165 1947 44,975.84 1948 56,259.14 1949 47,271.48 69166 1950 25,389.86 1951 101,821.04 1952 153,360.56 The only issue is whether respondent properly disallowed losses in excess of $ 50,000 incurred by petitioner in the operation of professional football teams during each of the years 1947 to 1951, inclusive, under
section 130, I.R.C. 1939 . *122 with the field of sports as owner of professional football and basketball teams and has also been a radio and television producer. During the taxable years 1943 through 1948, petitioner owned and operated the Boston Yanks, a member of the National Football League, the franchise for which he had paid $ 50,000. The Yanks played their home *593 games at Fenway Park in Boston, having a seating capacity of 38,000, during these years. Partly as a result of the competition provided by five college football teams and dozens of high school teams playing in the Boston area, attendance at the Yanks' home games was consistently poor. Petitioner incurred losses in operating the club of $ 151,113.30 in 1947 and $ 173,299.88 in 1948.By the end of the 1948 season petitioner concluded that there was little possibility of operating the Yanks at a profit. Accordingly, after the final game of the season he announced to the press that he had decided to dispose of or discontinue the club. When petitioner advised the commissioner of the National Football League of his intention of giving up the club, the commissioner asked him to delay the formal announcement to the league until the meeting *123 of the league's executive committee on January 21, 1949, in Chicago. Prior to that meeting the other club owners urged petitioner to continue. Nevertheless, at the league meeting the Boston Yanks' franchise was canceled upon petitioner's motion.
During the same meeting following the cancellation of the Boston franchise, the club owners approached petitioner with a plan to award him a franchise to operate a club in New York City. The club owners wished to have a second club in New York in addition to the New York Giants so that there would be a professional football game in New York each Sunday of the season. Petitioner was favorably inclined as New York was his home and he felt the chances of operating profitably in New York were considerably brighter than in Boston. At this same meeting the executive committee granted petitioner a franchise to operate in New York City beginning with the 1949 season. The New York franchise was granted to petitioner without charge by the league but petitioner was required to pay the Giants $ 25,000 per year for territorial rights to play in New York. Thereafter during the meeting petitioner employed a new coach for the New York team and participated*124 in the player draft, having first choice as a new team.
Petitioner named his New York team the Bulldogs. They played their home games at the Polo Grounds in New York City, which had a seating capacity of 55,000. Although petitioner sought to develop a large following for the Bulldogs by means of an extensive publicity campaign, they incurred a loss of $ 252,732.25 during the first season, and the club went out of existence late in 1949.
The New York Yanks were organized by petitioner in late 1949 and subsequent thereto their home games were played in Yankee Stadium, with a seating capacity of 70,000.
Petitioner then operated the New York Yanks for two seasons, 1950 and 1951, at losses of $ 225,870.90 and $ 195,211.42, respectively. Following the conclusion of the 1951 season the league bought petitioner's *594 franchise and sold it to Dallas. Petitioner has not owned a National Football League franchise since that time.
The National Football League consists of 12 teams organized into 2 divisions of 6 teams each. The league awards a franchise only upon the unanimous approval of all club owners. Only two franchise changes have been made by the league since the cancellation*125 of the Boston Yanks' franchise in 1949. It is not necessary to have a franchise canceled and a new franchise issued in order to move a National Football League team from one city to another.
None of the contracts of the Boston Yanks players for the 1948 season carried over to the 1949 season. Player contracts are normally for a period of 1 year although they can be made for a period of more than 1 year, and often contain option clauses for the next year. When the Boston franchise was canceled in January 1949, the Boston Yanks players became free agents. Some of the Boston players were invited to try out with the New York Bulldogs and 16 players were signed for the 1949 season. Several others played for other teams in 1949. In January 1949, the Bulldogs obtained 43 new players in the National Football League player draft. New contracts with the New York Bulldogs were signed by all the players.
Petitioner did not handle the financial management of any of the three teams and had little to do with the actual management of the teams. His general manager for the Boston Yanks was Arthur G. Sampson. His general manager for the New York Bulldogs and later for the New York Yanks was*126 Frank J. Fitzgerald. The coaching staffs and the front office personnel for each of the three clubs were entirely different. The main offices of the three football teams were at different locations.
The bank account for the Boston Yanks was maintained at the National Shawmut Bank in Boston. The bank account for the New York Bulldogs and later for the New York Yanks was maintained at the Manufacturers Trust Company in New York City.
Public relations and publicity were handled by different firms for each of the three football teams. The books and records for each football team were individually kept and were independent of each other having no relationship to each other whatsoever. All of the office furnishings and equipment of the Boston Yanks were sold and all bills were paid from the Boston Yanks' bank account before the books of the Boston Yanks were closed.
On July 1, 1944, the Boston Yanks filed with the city clerk of Boston a certificate of registry of doing business under an assumed name pursuant to Massachusetts law. On February 9, 1949, the New York Bulldogs filed a county clerk's certificate of registry of doing business under an assumed name pursuant to New York law. *127 *595 On April 17, 1950, the New York Bulldogs filed a certificate of discontinuance of doing business under an assumed name and on the same date the New York Yanks filed a county clerk's certificate of registry of doing business under an assumed name.
The losses disallowed by respondent are as follows: