ÿWPC+ …# VUNa %¯ 0(µbÝw.å4 ' 6 0J> 0Tˆ 0^Ü 0h: 0r¢ 0| 0† 0 1u¦ 0d U> B)½ DCæ AM)U*v v~¥ B#vÓ@ D3 0@F AO†ÆÕ 0D› D/ß B˜HP LaserJet 4Si/4SiMX PS 600dpiPSCRIPTÀÌÀääÀÀÌ0 (ÖÃ9 Z ‹6Times New Roman RegularX($¡¡- ù-vUwUxPyUzE{Ó€…DÒ žŸ ¡¢£¤¥¦§¨3|x…2 ÿÿ0Indent1Ô2ÔÔ3  Ô2" ÿÿ0Indent2à0 àÔ2ÔÔ3  Ô2, ÿÿ0Indent3à0 àà0 àÔ2ÔÔ3  Ô26 ÿÿ0Indent4à0 àà0 àà0 àÔ2ÔÔ3  Ô2@ ÿÿ0Indent5à0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2J ÿÿ0Indent6à0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2T ÿÿ0Indent7à0 àà0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2^ ÿÿ0Indent8à0 àà0 àà0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô ÿÿ?AGMSYaioIndent0I.A.1.a.(1)(a)i)a)P ÿÿ8Mac DefaultMac DefaultÓ ` °šXÓ< Œ 9p`(&Times New Roman% Line 7 d7Border 1dd€- Cþÿ << Gÿÿ< Œ 9p`(Arial ûÝ ƒ!ÝÑ#€d#ÑÔ€ÔÝ  ÝÔ€"ÔÔ€"ÔÓ  Óò òÔ YYY ÔFILEDÔ€"XÔÌÌNovember€8,€1996ÌÌCecil€W.€CrowsonÌAppellate€Court€ClerkÔ  Ôó óPtPt HHð@ÿìÿîRd(ühh° @d'ÿœÿ¦ š dStyl{WP}01•ÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃà Ãà Ãà Ãà Ãà ÃÃÃÃÃÃÃÃÃÃÃÐ ÐÐHHÐÐ  ÐÐ2ÐÐÿÿ¸æ$ÿÐÐHHÐÐÐÐÐÐÐÐ  ÐÐ ÐÐ ÐÑÑÑGenevaÑÑ ÑÑ € ÑÑ<Px–ÈÑÒÒÒ443!#4ÒÒ$ *$ÒÒ$*$ÒÒ ÿKK ÒÒ  Geneva ÒÒ  Geneva ÒÓ.,ÓÓÓÓ6ÓÓ ÓßßßßßßßßßßßßßßßßßßÑGenevaÑÑ ÑÒ  BA Op Geneva ÒÒ  BA Op Geneva Ò%%%%'ÿÿdxd("ÿÿ$££Ò  ÒÒ  Ò€-‚ƒCþÿ<< CÿÿƒLevel 1Level 2Level 3Level 4Level 5($$””ò òÚ  Ú1Ú  Úó ó„„'÷ÿ dxdüÿP PdÝ ƒ!ÝÔ . ÔÔ€ÔÝ  ÝÒ  ÒÒ „ ÒÑ  ÑÑ\R AØ'\ÑÑ€ÑÑ7€MXXdìdÈ7ÑÑ  ÑÑ  Ñà@ àò òIN€THE€COURT€OF€APPEALS€OF€TENNESSEEÌà@ àMIDDLE€SECTION€AT€NASHVILLEó óÌÌÌò òDAVID€HUTTON,à àà àà àà à)Ìà àà àà àà àà àà à)Ìà àPlaintiff/Appellee,à àà àà à)Ìà àà àà àà àà àà à)à àGiles€Chanceryà àÌà àà àà àà àà àà à)à àNo.€€8901ÌVS.à àà àà àà àà àà à)Ìà àà àà àà àà àà à)à àAppeal€No.Ìà àà àà àà àà àà à)à à01„A„01„9601„CH„00023ÌRUTH€E.€JOHNSON,€Commissioner€ofà à)ÌRevenue€for€the€State€of€Tennessee,à à)Ìà àà àà àà àà àà à)Ìà àDefendant/Appellant.à àà à)ÌÓÓó óÌà@ àò òÔ€¼ÔòòO€R€D€E€RóóÔ€XÔó óÌà àUpon€consideration€of€the€petition€to€rehear€filed€by€the€appellant€and€the€responseÏthereto€filed€by€appellee,€it€is€ordered€that€the€opinion€filed€on€August€30,€1996,€be€with„Ïdrawn€and€that€the€opinion€filed€contemporaneously€with€this€order€be€substituted€for€saidÏAugust€30,€1996,€opinion.ÌÌà àIt€is€further€ordered€that€the€judgment€entered€on€August€30,€1996,€be€vacated.ÌÌà àENTER€________________ÌÓÓÌà àà àà àà àà àà à___________________________________Ìà àà àà àà àà àà àHENRY€F.€TODDÌà àà àà àà àà àà àPRESIDING€JUDGE,€MIDDLE€SECTIONÌÌCONCUR:ÌÌÌ______________________________ÌBEN€H.€CANTRELL,€JUDGEÌÌÌÌDISSENTS€IN€SEPARATE€OPINIONÌWILLIAM€C.€KOCH,€JR.,€JUDGEÌà àà àà àà àÌÓÓò òÌÌÌÌÓÓDAVID›€HUTTON,à àà àà àà à)Ìà àà àà àà àà àà à)Ìà àPlaintiff/Appellee,à àà àà à)Ìà àà àà àà àà àà à)à àGiles€Chanceryà àÌà àà àà àà àà àà à)à àNo.€€8901ÌVS.à àà àà àà àà àà à)Ìà àà àà àà àà àà à)à àAppeal€No.Ìà àà àà àà àà àà à)à à01„A„01„9601„CH„00023ÌÙ€€ÙœßL€!# ;+'h|+Q` ç `€€Lß›RUTH€E.€JOHNSON,€Commissioner€ofà à)ÌRevenue€for€the€State€of€Tennessee,à à)Ìà àà àà àà àà àà à)Ìà àDefendant/Appellant.à àà à)Ì̛̜à@ àIN€THE€COURT€OF€APPEALS€OFÏTENNESSEEÌà@ àMIDDLE€SECTION€AT€NASHVILLEÌÌà@ àAPPEAL€FROM€THE€CHANCERY€COURT€OF€GILES€COUNTYÌà@ àAT€PULASKI,€TENNESSEEÌÌà@ àHONORABLE€JAMES€L.€WEATHERFORD,€JUDGEÌó óÌÌChristopher€M.€WasÌTRABUE,€STURDIVANT€&€DeWITTÌ2500€Nashville€City€CenterÌ511€Union€StreetÌNashville,€Tennessee€37219„1738ÌATTORNEY€FOR€PLAINTIFF/APPELLEEÌÌÌCHARLES€W.€BURSONÌAttorney€General€and€ReporterÌÌSEAN€P.€SCALLYÌAssistant€Attorney€GeneralÌTax€Division,€Suite€2121Ì404€James€Robertson€ParkwayÌNashville,€Tennessee€37243„0489ÌFOR€DEFENDANT/APPELLANTÌÌÌAFFIRMED€AND€REMANDED̛̜Ìà àà àà àà àà àHENRY€F.€TODDÌà àà àà àà àà àPRESIDING€JUDGE,€MIDDLE€SECTIONÌÌœCONCUR:›ÌBEN€H.€CANTRELL,€JUDGEÌœÌÌDISSENTS›€IN€SEPARATE€OPINIONÌWILLIAM€C.€KOCH,€JR.,€JUDGEÇò òDAVID€HUTTON,à àà àà àà à€)Ìà àà àà àà àà àà à€)Ìà àPlaintiff/Appellee,à àà àà à€)Ìà àà àà àà àà àà à€)à àGiles€Chanceryà àÌà àà àà àà àà àà à€)à àNo.€€8901ÌVS.à àà àà àà àà àà à€)Ìà àà àà àà àà àà à€)à àAppeal€No.Ìà àà àà àà àà àà à€)à à01„A„01„9601„CH„00023ÌRUTH€E.€JOHNSON,€Commissioner€ofà à€)ÌRevenue€for€the€State€of€Tennessee,à à€)Ìà àà àà àà àà àà à€)Ìà àDefendant/Appellant.à àà à€)ÌÌÓÓÌà@ àòòÔ€¼ÔO€P€I€N€I€O€NÔ€XÔóóÌÓÓó óÌÓÓà àThe€defendant/Commissioner€has€appealed€from€a€summary€judgment€of€the€TrialÏCourt€requiring€the€Commissioner€to€refund€to€plaintiff€€$75,832€use€tax€paid€under€protest.€ÏThe€facts€are€uncontroverted.€€The€question€before€the€Trial€Court€and€before€this€Court€is€theÏapplication€of€the€law€to€the€factual€situation.ÌÌà àOn€and€prior€to€June€25,€1993,€plaintiff€€was€the€owner€of€a€Model€F90€Beech€aircraftÏwhich€he€desired€to€replace€with€a€jet€aircraft.€€The€desired€aircraft€was€not€immediatelyÏavailable.€€On€June€25,€1993,€plaintiff€entered€into€an€eight€page€written€agreement€with€BellÏAircraft,€Inc.€which€provided€that€the€value€of€the€Beech€aircraft€was€$1,142,000,€but€that€theÏagreed€value€of€plaintiffððs€equity€in€the€Beech€aircraft€was€œ$629,086.52›€because€of€an€existingÏlien€thereon;€that€plaintiff€would€convey€the€Beech€aircraft€to€Bell€on€the€date€of€the€contract;Ïthat€plaintiff€would€buy€the€replacement€jet€from€or€through€Bell€when€a€satisfactory€jet€wasÏfound;€that€Bell€would€deposit€$629,086.52€with€a€named€escrow€agent€to€be€used€in€theÏpurchase€of€the€jet€when€found;€and€that€plaintiff€would€not€have€access€to€the€escrow€fund€forÍany€other€purpose€œexcept€to›€œpay›€for€the€replacement€and€receive€the€surplus,€if€any,€after€theÏreplacement.Ìœ›à àThe€contract€contained€the€following€verbatim€provision:ÌÓ  ÓÓÓà8 àà8 àSECONDÌÓ  Óà8 àà8 àœà àA.›€€The€consideration€for€the€conveyance€of€the€propertyÏœshall€be›€the€exchange€by€Bell€of€title€to€œpersonalÌÌà àà à€property›€œof€›€ð ðlike€kindðð€within€the€meaning€of€€ðð€1031€œÌ›œà à›œà à›œof›€the€Internal€Revenue€Code€which€shall€hereafter€œbe›€œÌà àà àacquired›€by€Bell€and€which€shall€be€acceptable€to€œowner›€œÌà àà à(referred›€to€herein€as€ð ðExchange€Propertyðð).ÌÌà8 àà0 àà àà8 àœà àB.›€€Owner€shall€enter€into€a€contract€for€the€œacquisition›€of€theÏExchange€Property€which€shall€be€assigned€to€Bell€for€use€as€theÏExchange€Property.€€The€assignment€shall€be€made€in€the€form€attachedÏas€òòExhibit€B,óó€and€notice€of€such€assignment€shall€be€given€to€the€thirdÏparty€seller€of€the€Exchange€Property,€prior€to€the€deferred€exchangeÏclosing€date,€in€the€form€attached€as€òòExhibit€Cóó.ÌÌÌÓÓà àThe€import€of€this€provision€is€that,€if€plaintiff€should€find€a€suitable€aircraft€andÏcontract€for€its€purchase,€plaintiff€would€assign€the€purchase€contract€to€Bell€so€that€theÏperformance€of€the€sale€contract€by€the€third€party€seller€would€be€considered€a€performance€byÏBell€of€its€agreement€to€acquire€and€sell€the€replacement€aircraft€to€plaintiff.ÌÌà àPlaintiff€learned€that€the€desired€aircraft€could€be€bought€from€Cessna€AircraftÏCompany€and€executed€a€contract€with€Cessna,€whereby€Cessna€would€sell€the€Cessna€AircraftÏto€plaintiff€for€$2,250,000.€€Plaintiff€assigned€the€contract€to€Bell;€Bell€released€the€escrowÏfund€to€Cessna€in€part€payment€of€the€$2,250,000€purchase€price€and€instructed€Cessna€toÏconvey€the€replacement€aircraft€to€plaintiff.€€Plaintiff€paid€or€financed€the€remainder€of€theÏ$2,250,000€and€Cessna€conveyed€the€aircraft€to€plaintiff.ÌÌà àPlaintiff€paid€use€tax€upon€the€entire€$2,250,000,€but€that€part€of€the€tax€which€wasÏattributable€to€the€$1,142,000€value€of€the€Beech€aircraft€was€paid€under€protest.ÌÌà àAs€stated,€the€Trial€Court€awarded€plaintiff€summary€judgment€for€$75,832,€which€wasÏthe€amount€of€tax€which€would€have€been€due€upon€$1,142,000.€€The€commissioner€appealed.ÌÌà àThe€issues€on€appeal€are€whether€plaintiff€is€entitled€to€any€refund€under€the€aboveÏstated€undisputed€facts€and,€if€so,€the€correct€amount€of€the€refund.€€TCA€ðð67„6„510.€€At€theÏtime€of€the€transaction,€T.C.A.€ðð€67„6„510€œread›€as€follows:ÌÓÓà8 àà8 àò òComputation€on€trade„ins.ó ó€€Where€used€articles€are€taken€inÏtrade,€or€in€a€series€of€trades,€as€a€credit€or€part€payment€on€theÏsale€of€new€or€used€articles,€the€tax€levied€by€this€chapter€shallÏbe€paid€on€the€net€difference,€that€this,€the€price€of€the€new€orÏused€article€sold€less€the€credit€for€the€used€article€taken€in€trade.€Ï[Acts€1947,€ch.€3,€subsec.€6;€mod.€C.€Supp.€1950,€ðð€1248.62Ï(Williams,€ðð€1328.28);€T.C.A.€(Orig.€Ed.),€ðð€67„3015.]ÌÌÌÓÓà àThe€Commissioner€insists€that€the€trade„in€exemption€is€inapplicable€because€theÏtransaction€between€Cessna€and€plaintiff€did€not€involve€a€trade„in;€indeed€the€sales€contractÏbetween€Cessna€and€plaintiff€stated€the€purchase€price€as€$2,250,000€and€contained€theÏfollowing:ÌÓÓà8 àà8 àLess€œtrade„in›€allow:à àòò„0„óóÌÌÌÓÓà àPlaintiff€responds€that,€under€his€contract€with€Bell€quoted€above,€he€was€required€toÏand€did,€assign€his€contract€with€Cessna€to€Bell,€so€that€Cessnaððs€action€in€selling€andÏconveying€the€aircraft€to€plaintiff€was€done€at€the€direction€of€Bell€and€in€satisfaction€of€BellððsÏagreement€to€sell€such€an€aircraft€to€plaintiff.ÌÌà àUnquestionably,€if€Bell€had€purchased€the€replacement€aircraft€from€Cessna€andÏreconveyed€it€to€plaintiff,€the€value€of€the€Beechcraft€would€be€exempt€from€use€tax€as€a€œð ðtrade„inðð›€under€the€quoted€statute.ÌÌà àœConsidering›€the€Cessna€contract€alone,€plaintiff€is€not€entitled€to€a€œtrade„in›€allowance.ÌœOn›€the€other€hand,€if€the€Bell€contract€is€considered,€it€is€possible€to€consider€the€CessnaÏcontract€as€a€fulfillment€of€the€Bell€contract€as€to€which€there€was€a€œð ðtrade„in.ðð›ÌÌà àThe€Commissioner€cites€òòState€v.€Slieger,óó€Tenn.€1993,€846€S.W.2d€262,€wherein€theÏSupreme€Court€declined€to€extend€the€ð ðflagrant€non„support€statuteðð€to€include€a€parent€whoÏhas€never€resided€in€Tennessee€and€remains€outside€the€state€to€avoid€being€forced€to€support€aÏchild.€€The€Court€did€indicate€an€aversion€to€ð ðunduly€restricting€or€expanding€the€legislativeÏintent.ððÌÌà àThe€Commissioner€cites€the€definition€of€œð ðtrade„in,ðð›€and€asserts€correctly€that€CessnaÏdid€not€receive€title€to€the€Beechcraft€aircraft€as€a€œtrade„in.›€€On€the€other€hand,€Bell€did€receiveÏtitle€to€the€Beechcraft€aircraft€as€a€œtrade„in›€and€did€place€its€œnet€equity€value›€in€escrow€to€beÏused€as€part€payment€of€the€jet€aircraft€plaintiff€had€agreed€to€buy€from€Bell,€and€œsaid€net›€valueÏdid€reduce€the€cost€of€the€Cessna€purchased€by€plaintiff.ÌÌà àThe€Commissioner€next€argues€that€the€contract€between€Cessna€and€plaintiff€cannot€beÏvaried€by€extraneous€evidence.€€This€rule€is€applicable€between€the€parties€to€the€contract;€but,Ïwhere€the€contract€is€assigned€by€one€of€the€parties,€the€circumstances€of€the€performance€ofÏthe€contract€may€be€considered€in€determining€tax€liability€upon€the€contract.ÌÌà àThe€Commissioner€next€argues€that€plaintiff€did€not€comply€with€regulationsÏpromulgated€by€the€Commissioner€requiring€the€model€and€serial€number€of€the€œtrade„in›€to€beÏlisted€in€the€invoice€evidencing€the€transaction.€€The€Beechcraft€œtrade„in›€was€described€withÏparticularity€in€the€exhibit€attached€to€the€Bell€contract.€€Although€not€a€precise€compliance€withÏthe€regulation,€the€exhibit€was€a€substantial€compliance,€and€the€commissioner€does€not€pointÏout€wherein€the€State€was€prejudiced€thereby€or€why,€in€equity€and€good€conscience€plaintiffÏshould€be€required€to€pay€use€tax€on€that€part€of€the€purchase€price€of€the€Cessna€which€wasÏnot€paid€by€plaintiff€but€by€the€escrowed€value€of€the€œtrade„in.›ÌÌà àIn€òòMcDonaldððs€Restaurant€of€Ill.€v.€Commissioneróó,€7th€Cir.€1982,€688€F.2d€520,€theÏMcDonald€restaurant€chain€purchased€a€chain€of€restaurants€for€which€the€sellers€demandedÏcash.€€McDonaldððs€issued€stock€to€the€sellers€but€registered€the€stock€so€that€the€sellers€couldÏreadily€sell€the€stock€and€obtain€the€cash€they€desired.€€The€Appeals€Court€held€that€theÏtransaction€could€be€treated€as€a€cash€purchase€for€income€tax€purposes€under€ð ðpooling€ofÏinterests.ðð€€The€Court€said:ÌÓÓà8 àà8 àThe€step„transaction€doctrine€is€a€particular€manifestation€of€theÏmore€generous€tax€law€principle€that€purely€formal€distinctionsÏcannot€obscure€the€substance€of€a€transaction.ÌÌà8 àà8 à.€.€.€.ÌÌà8 àà8 à[U]nder€the€ð ðend€result€test,ðð€ð ðpurportedly€separate€transactionsÏwill€be€amalgamated€with€a€single€transaction€when€it€appearsÏthat€they€were€really€component€parts€of€a€single€transactionÏintended€from€the€outset€to€be€taken€for€the€purpose€of€reachingÏthe€ultimate€resultðð€œ(Citations›€omitted).ÌÌà8 àà8 à.€.€.€.ÌÌà8 àà8 àA€second€test€is€the€ð ðinterdependenceðð€test,€which€focuses€onÏwhether€ð ðthe€steps€are€so€interdependent€that€the€legal€reactionsÍcreated€by€one€transaction€would€have€been€fruitless€without€aÏcompletion€of€the€series.ðð€€œ(Citations›€omitted)ÌÌà8 àà8 à.€.€.€.ÌÌà8 àà8 àThe€ð ðbinding€commitmentðð€test€forbids€use€of€the€step„transaction€doctrine€unless€ð ðif€one€transaction€is€to€beÏcharacterized€as€a€ððfirst€stepðð€there€[is]€a€binding€commitment€toÏtake€the€later€steps.ððÌÌÌÓÓà àAlthough€the€foregoing€relates€to€tax€other€than€use€tax,€its€reasoning€is€appropriate€toÏthe€circumstance€of€the€present€case€and€is€adopted€by€this€Court.ÌÌà àThe€Commissioner€argues€that€his€findings€of€fact€are€entitled€to€a€presumption€ofÏcorrectness.€€The€issue€in€this€appeal€involves€a€finding€of€law€applicable€to€undisputed€facts.€ÏThis€Court€respectfully€differs€œwith›€the€Commissionerððs€finding€of€law,€and€agrees€with€theÏTrial€Court€that€the€amount€of€the€ð ðtrade„in,ðð€should€be€deducted€from€the€total€sale€price€toÏdetermine€the€net€taxable€amount€of€the€sale.ÌÌà àIt€appears,€however,€that€the€Trial€Court€œmiscalculated›€the€amount€of€the€œð ðtrade„in›Ïexemptionðð€by€computing€6%€tax€on€$1,142,000,€the€gross€value€of€the€ð ðtrade„in.ðð€€This€wasÏincorrect,€for€the€amount€credited€to€the€sale€price€of€the€Cessna€aircraft€was€the€net€value€of€theÏtrade€in€after€deduction€of€the€lien,€which€was€$629,006.52,€the€amount€of€the€escrow€fundsÏdelivered€to€Cessna,€and€actually€credited€to€the€sale€œprice.€€The€taxable€amount€of€the€sale€ofÏthe€Cessna€was€$2,250,000€minus€$629,006.52,€or€$1,620,993,€on€which€6%€tax€would€beÏ$97,259.61.›ÌÌœà àThe›€judgment€of€the€œTrial›€Court€is€therefore€œvacated€and€the€casue€is€remanded€forÏrecomputation€of€the€amount€of€penalty€and€attorneys€fees€and€the€entry€of€a€judgment€forÍrefund€in€comformity€with€this€opinion€including›œ›€prejudgment€interest€œon€the€amount€of€theÏrevised›€judgment€from€the€date€of€payment€under€œprotest,›€and€attorneys€fee€on€the€revisedÏamount€of€the€œjudgement.€€Statutory€interest€will€accrue€on€the€revised€judgment€fromÏNovember€27,€1995,€the€date€of€the€judgment€of€the€Trial€Court.›€ÌÌà àAs€modified,€€judgment€of€the€Trial€Court€is€affirmed.€€One€half€of€the€costs€of€thisÏappeal€will€be€paid€by€each€party.€€The€cause€is€remanded€to€the€Trial€Court€for€any€necessaryÏfurther€proceedings.ÌÌÓ  Óò òà àAFFIRMED€AND€REMANDED.ó óÌÓ  Óà àÓÓà àà àà àà àà àà àà àà àà àà àà àà àà àà àà àà àà à___________________________________Ìà àà àà àà àà àà àHENRY€F.€TODDÌà àà àà àà àà àà àPRESIDING€JUDGE,€MIDDLE€SECTIONÌÌÌÌCONCUR:ÌÌÌ_____________________________ÌBEN€H.€CANTRELL,€JUDGEÌÌÌÌDISSENTS€IN€SEPARATE€OPINIONÌWILLIAM€C.€KOCH,€JR.,€JUDGE