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PETERS ORCHARD COMPANY v. COMMONWEALTH PENNSYLVANIA (08/20/85)

decided: August 20, 1985.

THE PETERS ORCHARD COMPANY, PETITIONER
v.
COMMONWEALTH OF PENNSYLVANIA, RESPONDENT



Appeal from the Order of the Board of Finance and Revenue in the case of In Re: The Peters Orchard Company, No. R-7349.

COUNSEL

Donald G. Oyler, Wolf and Oyler, for petitioner.

Eugene J. Anastasio, with him, Michael A. Roman, Deputy Attorneys General, and LeRoy S. Zimmerman, Attorney General, for respondent.

Judges Rogers, MacPhail and Palladino, sitting as a panel of three. Opinion by Judge Palladino.

Author: Palladino

[ 91 Pa. Commw. Page 214]

The Peters Orchard Company (Petitioner) appeals from a Board of Finance and Revenue determination that it is not entitled to the "family farm corporation"*fn1 exemption from capital stock taxation. We affirm.

The parties have stipulated all of the facts upon which we rely for purposes of this appeal. Those facts relevant to the disposition of this appeal are as follows. Petitioner is a Pennsylvania corporation which was formed in 1960. At all times since its incorporation, all of the issued and outstanding corporate stock of Petitioner has been owned by John B. Peters, his wife Mary E. K. Peters, and their six children. Petitioner's sole business activity since its incorporation has been the leasing of its assets, consisting of fruit farms located in Pennsylvania and farm machinery and equipment, to John B. Peters individually until 1974, and thereafter to John B. Peters, Inc.*fn2 Both lessees used these assets in their farming operations.

[ 91 Pa. Commw. Page 215]

In filing its Capital Stock Tax Report for the fiscal year ending November 30, 1981, Petitioner asserted that it was exempt from the capital stock tax because it qualified as a "family farm corporation". The Department of Revenue denied the claimed exemption, however, fixing the taxable value of Petitioner's stock at $475,000.00, and setting its capital stock tax for that fiscal year at $4,750.00.

Section 602.2(a) of the Tax Reform Code of 1971 (Code), 72 P.S. § 7602.2(a), provides that "family farm corporations" shall be exempt from capital stock tax liability. Section 602.2(b)(1) of the Code, 72 P.S. § 7602.2(b)(1), defines "family farm corporation" as:

A Pennsylvania corporation at least seventy-five per cent of the assets of which are devoted to the business of agriculture, which business, for the purposes of this definition, shall not be deemed to include (i) recreational activities such as, but not limited to, hunting, fishing, camping, skiing, show competition or racing; (ii) the raising, breeding or training of game animals or game birds, fish, cats, dogs or pets, or animals intended for use in sporting or recreational activities; (iii) fur farming; (iv) stockyard and slaughterhouse operations; or (v) manufacturing or processing operations of any kind: Provided, however, that at least seventy-five per cent of all of the stock of the corporation must be owned by members of the same family.

It is undisputed that Petitioner satisfies the stock ownership criterion. It is also undisputed that John B. Peters, Inc., the corporation to which Petitioner leased all of its assets during fiscal year 1981, operates the farmland it leases and uses the ...


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