opinion: HOLDCROFT TRANSP. CO. v. COMMISSIONER OF INTERNAL REVENUE.
  No. 13152.
  Circuit Court of Appeals, Eighth Circuit.
  Feb. 21, 1946.
  Louis S. Goldberg, of Sioux City, Iowa, for petitioner.
  Harold C. Wilkenfeld, Sp. Asst, to Atty. Gen. (Samuel O. Clark, Jr., Asst. Atty. Gen., and Sewall Key, J. Louis Monarch, and S. Dee Hanson, Sp. Assts. to Atty. Gen., on the brief), for respondent.
  Before STONE, SANBORN, and THOMAS, Circuit Judges.
  SANBORN, Circuit Judge.
  The petitioner asserts that the Commissioner of Internal Revenue and the Tax Court of the United States erroneously disallowed a deduction taken by petitioner in its income and excess-profits tax return for the fiscal year ended October 31, 1940. The disallowance caused a deficiency of $1,017.85 in petitioner’s income tax and $314.19 in its declared value excess-profits tax for that year.
  The question presented is whether the deduction claimed by petitioner was for capital expenditures, which were nondeductible, or for ordinary and necessary business expenses or 'business losses, which were deductible.
  The facts are stipulated, and for the purpose of this opinion, may be stated briefly as follows:
  The petitioner is an Iowa corporation engaged in business as a common and contract carrier by motor vehicle. It commenced operations on November 1, 1939, having on that day acquired the business and assets of a partnership of the same name in exchange for petitioner’s common stock and the assumption by petitioner of the liabilities of the partnership. These liabilities included two claims known as the Cass and Miller claims, which grew out of a collision between a truck operated by the partnership and an automobile in which Cass and Miller were riding. The collision ‘occurred January 16, 1935. Two suits were brought in the District Court of Woodbury County, Iowa, against the partnership, the partners, and the driver of the truck; one for the alleged wrongful death of Cass, and the other for personal injuries suffered by Miller. The defendants in these suits denied liability. The suits were still pending at the time the petitioner took over the assets of the partnership and assumed its liabilities. The litigation was thereafter conducted by petitioner. In the Cass suit, a judgment for $7,417.10 had been entered in April, 1939. On a motion for a new trial, the plaintiff was ordered to remit $3,000 of the judgment or submit to a new trial. A remittitur was filed November 29, 1939. The petitioner concluded that to continue the litigation would jeopardize its credit, and “that business prudence dictated immediate settlement” of the controversy. On December 6, 1939, petitioner paid the Clerk of the District Court of Woodbury County, Iowa, $4,927 in full satisfaction of the Cass judgment. The Miller suit never came to trial. For the same reasons which induced the petitioner to pay the Cass judgment, it settled the Miller suit for $2,625. Petitioner paid, in addition, $17.59 Clerk’s costs, $15 for an appearance bond, and $276.27 to its counsel for services in connection with the settlement of the Miller claim. The total amount paid by the petitioner with respect to both the Cass and Miller claims against the partnership was $7,860.86.
  In its return for the fiscal year ended October 31, 1940, the petitioner deducted as “law expense” the entire $7,860.86. The Commissioner disallowed the deduction. The Tax Court, on review, allowed as a deduction the $276,27 paid by petitioner for services rendered by its attorneys. The Tax Court assumed that the services were rendered after November 1, 1939, in connection with the settlement of the Miller claim. The Tax Court disallowed the re-" mainder of the claimed deduction upon the ground that it represented a capital expenditure, being part of the consideration for the acquisition by petitioner of the assets of the partnership. This resulted in the deficiencies of which the petitioner complains.
  The contention of the petitioner, in substance, is that, since the Cass and Miller claims against the partnership were contingent on November 1, 1939, and since the business of the petitioner was a mere continuation of the business of the partnership, the assets of which were acquired in a tax-free exchange, the amounts paid in settlement of the claims were not capital expenditures, but were either ordinary and necessary expenses of carrying on petitioner’s trade or business, deductible under § 23(a) (1) of the Internal Revenue Code, 26 U.S.C.A. Int.Rev.Code, § 23(a) (1), or losses sustained, deductible under § 23 (f) of the Code.
  It is obvious that if what the petitioner paid in settlement of the claims against the partnership was a part of the purchase price of its assets, .the payments were capital expenditures, and not current expenses or losses of the business of petitioner. • The petitioner concedes that this would be true if the claims against its predecessor had been fixed liabilities, but is of the opinion that, since the claims were contingent and unliquidated at the time of the transfer, their subsequent payment, in order to preserve the petitioner’s credit and business, may not be considered a capital expenditure. The payment by petitioner of the-claims against the partnership reasonably can be attributed only to the assumption by petitioner of liability for those claims. The claims did not arise out of the operation of the business of petitioner. The expense of settling them was not an operating expense or operating loss of that business, but a part of the cost of acquisition of the property of the partnership; and the fact that the claims against the partnership were contingent and unliquidated at the time of acquisition is not, in our opinion, of controlling consequence. See and compare, Lifson v. Commissioner, 8 Cir., 98 F.2d 508, 510; United States v. Consolidated Elevator Co., 8 Cir., 141 F. 2d 791, 792-793; Magruder v. Supplee, 316 U.S. 394, 62 S.Ct. 907, 86 L.Ed. 1555.
  The petitioner asserts that, because it acquired the assets of the partnership in a tax-free transfer by virtue of § 112(b) (5) and § 113(a) (8) of the Internal Revenue Code, 26 U.S.C.A. Int.Rev. Code, § 112(b) (5) and § 113(a) (8), petitioner is in the same position with respect to expense and loss deductions as its predecessor would have been in if there had been no transfer. This contention is unsound. The statutes referred to expressly relate to the basis for determining gain or loss upon the sale or exchange of property. While the assets of the partnership transferred to petitioner took the same cost basis in its hands as they had in the hands of its transferor, there is no justification for a ruling that the petitioner could deduct from the gross income of its business, expenses or losses attributable to the operation of the business by its predecessor. An income tax deduction is a matter of legislative grace, and the burden is on the taxpayer to demonstrate his right to it. Interstate Transit Lines v. Commissioner, 319 U.S. 590, 593, 63 S.Ct. 1279, 87 L.Ed. 1607.
  The Tax Court’s decision, we think, is correct. It is affirmed.
  Sec. 23(a) (1) allows as deductions:
  “All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business * * * and rentals or other payments required to be made as a condition to the continued use or possession, for purposes of the trade or business, of property to which the taxpayer has not taken or is not taking title or in which he has no equity.”
  Sec. 23(f) allows a deduction to corporations for “losses sustained during the taxable year and not compensated for by insurance or otherwise.”
instruction: What follows is an opinion from a United States Court of Appeals.
  Intervenors who participated as parties at the courts of appeals should be counted as either appellants or respondents when it can be determined whose position they supported. For example, if there were two plaintiffs who lost in district court, appealed, and were joined by four intervenors who also asked the court of appeals to reverse the district court, the number of appellants should be coded as six.
  In some cases there is some confusion over who should be listed as the appellant and who as the respondent. This confusion is primarily the result of the presence of multiple docket numbers consolidated into a single appeal that is disposed of by a single opinion. Most frequently, this occurs when there are cross appeals and/or when one litigant sued (or was sued by) multiple litigants that were originally filed in district court as separate actions. The coding rule followed in such cases should be to go strictly by the designation provided in the title of the case. The first person listed in the title as the appellant should be coded as the appellant even if they subsequently appeared in a second docket number as the respondent and regardless of who was characterized as the appellant in the opinion.
  To clarify the coding conventions, consider the following hypothetical case in which the US Justice Department sues a labor union to strike down a racially discriminatory seniority system and the corporation (siding with the position of its union) simultaneously sues the government to get an injunction to block enforcement of the relevant civil rights law. From a district court decision that consolidated the two suits and declared the seniority system illegal but refused to impose financial penalties on the union, the corporation appeals and the government and union file cross appeals from the decision in the suit brought by the government. Assume the case was listed in the Federal Reporter as follows:
  United States of America,
  Plaintiff, Appellant
  v
  International Brotherhood of Widget Workers,AFL-CIO
  Defendant, Appellee.
  International Brotherhood of Widget Workers,AFL-CIO
  Defendants, Cross-appellants
  v
  United States of America.
  Widgets, Inc. & Susan Kuersten Sheehan, President & Chairman
  of the Board
  Plaintiff, Appellants,
  v
  United States of America,
  Defendant, Appellee.
  This case should be coded as follows:Appellant = United States, Respondents = International Brotherhood of Widget Workers Widgets, Inc., Total number of appellants = 1, Number of appellants that fall into the category "the federal government, its agencies, and officials" = 1, Total number of respondents = 3, Number of respondents that fall into the category "private business and its executives" = 2, Number of respondents that fall into the category "groups and associations" = 1.
  Note that if an individual is listed by name, but their appearance in the case is as a government official, then they should be counted as a government rather than as a private person. For example, in the case "Billy Jones & Alfredo Ruiz v Joe Smith" where Smith is a state prisoner who brought a civil rights suit against two of the wardens in the prison (Jones & Ruiz), the following values should be coded: number of appellants that fall into the category "natural persons" =0 and number that fall into the category "state governments, their agencies, and officials" =2. A similar logic should be applied to businesses and associations. Officers of a company or association whose role in the case is as a representative of their company or association should be coded as being a business or association rather than as a natural person. However, employees of a business or a government who are suing their employer should be coded as natural persons. Likewise, employees who are charged with criminal conduct for action that was contrary to the company policies should be considered natural persons.
  If the title of a case listed a corporation by name and then listed the names of two individuals that the opinion indicated were top officers of the same corporation as the appellants, then the number of appellants should be coded as three and all three were coded as a business (with the identical detailed code). Similar logic should be applied when government officials or officers of an association were listed by name.
  Your specific task is to determine the total number of appellants in the case that fall into the category "private business and its executives". If the total number cannot be determined (e.g., if the appellant is listed as "Smith, et. al." and the opinion does not specify who is included in the "et.al."), then answer 99.