The Washington times. [volume] (Washington [D.C.]) 1902-1939, 1928-07-28

OF income tax deductions IN the
The Association calls the attention.
OF its customers to the fact that
the Supreme Court has decided
that whenever residential property
is no longer used by It's owner Tor
that purpose but instead has been.
turned to rental purposes. any loss
sustained in subsequent sale OF
the property may be deducted by
the taxpayer iii determining his net
income The decision was brought In
4 case relating 10 the sale Of the
residence 81 the late Plilander q.
Knox Secretary Of State under
President Taft.
New York Ruling
The District Court Tor the West
ern District.of New York has gone
I step further and has decided that
wherever residential property Is
Abandoned for the owners personal
use Il dwelling and due diligence
il exercised In effort To rent the
property anv loss sustained from u
Isubseuuent sale OF the property may
be deducted, whether Or not the
owner succeeded in renting II. The
decision was rendered N the case
Of the estate Of the late John n.
L.arlxlns q,
Tinese decisions revise what until
recently has been q general under.
standing in regard to the appiica.
ton OF the income tax law 70 owned
homes
The home owner r. permitted BY
Federal law to deduct from his
income tax return payments made
for interest on taxes on his home.
Pin ~ the other hand the income
| tax law does not permit him 70
treat his residence property as 4
| it were property from which he ex-
nacfed ID make an income, or which
| he nan purchased To hold for re-
sale All profit. 1T has been the
General understanding that il deter
naiT,fng the amount OF his net m
come ne could not deduct any loss
sustained from the sale Of fesiden-
| tiaI properly
In view of the supreme Court ac-
1 ton the national association points
out purchasers OF real estate Tor
residential purposes. the advisabliity
THAT they have iii mind the pr0Dable
/ further enhancement in value of it
i and d sale 81 ii az profit, ana
advises further that the purchaser
be able 10 show that he had this
/ iii mind.
Realtor Has Data
Whether the taxpayer who buys
4 property for residence purposes, z nt
4 who III the same time has am eye
to possible Increase in value MAJ
Iif he sells. at loss. deduct IS ne
would III the case II sale at income
producing property Is left ~ an
il open question ~ the supreme Court
Il ppinisfi.
The question n an ir1p ant point
d for real estate, inasn1uch az ~
many Instances. perhaps in most
Il instances. the realtors handling the
property can show that the pu--
{, chaser Of residential property had IN
mind not only the use of II for resi-
Dental purposes, but also the proba-
4 bility az its increasing IN value.
The revenue act OF 1918 permitted
deduction by taxpayer in deter
mining his net income for losses
| sustained during the taxable year
lif incurred In any transaction en-
tered into for profit even though
not connected with his trade OF
business.
i The Treasury regulations promul-
gated in 1919 as amended in 1921,
j provided that a loss in the sale Of
residential property is not deducti-
Bile unless the property was pur-
chased or constructed with a view
to subsequent sale for pecuniary
profit. The law and the regulations
in this respect remained unchanged
d under the revenue acts Of 1921. 1924,
u and 1926,
4 Knox Case as Test
In the case of the Knox property
the court found that that residential
use OF the property came to an
end when it was leased, and that
b thereafter it was a property devoted
exclusively to the production OF
profit in the form of rentals.
The opinion also states that the
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