Case Name: Gertrude H. Sweet, Petitioner, v. Commissioner of Internal Revenue, Respondent
Court: United States Board of Tax Appeals
Jurisdiction: United States
Decision Date: 1927-09-29
Citations: 8 B.T.A. 404
Docket Number: Docket No. 9240
Parties: Gertrude H. Sweet, Petitioner, v. Commissioner of Internal Revenue, Respondent.
Judges: Considered by Littleton and Love.
Reporter: Reports of the United States Board of Tax Appeals
Volume: 8
Pages: 404–406

Head Matter:
Gertrude H. Sweet, Petitioner, v. Commissioner of Internal Revenue, Respondent.
Docket No. 9240.
Promulgated September 29, 1927.
J. Porter Russell, Esq., for the petitioner.
J. W. Fisher, Esq., for the respondent.

Opinion:
OPINION.
Smith :
There is no contention in this proceeding as to the amount of profit realized by the petitioner upon the sale of the land in Detroit. The only question is the amount of profit which she is liable to income tax upon in the year 1920. The respondent claims that the amount of profit realized in 1920 is the difference between the value of the land at the time acquired by the petitioner and the selling price, or $60,000. Petitioner's original contention is that the transaction was a deferred-payment contract and if not allowed as a deferred-payment contract it was an installment contract within the meaning of the Commissioner's regulations. At the hearing the petitioner amended her petition to claim that the transaction was a deferred-payment contract under the provisions of the Revenue Act of 1926.
The evidence of record indicates that the cash value of the land contract received by the petitioner in 1920 was not equal to its face value. Richard G. Lambrecht, a deponent on behalf of the petitioner, deposed that in his opinion the contract could not have been sold except at a discount of from 25 to 30 per cent. Upon the basis of his testimony, we have reached the conclusion that the fair market value of the contract at the date of receipt was 75 per cent of its face value, that is, the face of the deferred payments.
Section 212(d) of the Revenue Act of 1926 provides:
In the case of a sale or other disposition of real property, if the initial payments do not exceed one-fourth of the purchase price, the income may, under regulations prescribed by the Commissioner with the approval of the Secretary, be returned on the basis and in the manner above prescribed in this subdivision. As used in this subdivision the term " initial payments " means the payments received in cash or property other than evidences of indebtedness of the purchaser during the taxable period in which the sale or other disposition is made.
Section 1208 of the same Act provides that subdivision (d) of section 212 shall be retroactively applied in computing income under the provisions of prior Revenue Acts beginning with the Revenue Act of 1916.
By virtue of the provisions of the Revenue Act of 1926 the petitioner claims the right to have her income from the sale of the property in question computed on the installment basis. It is clear from the facts, however, that she is not entitled to any benefits under the Revenue Act of 1926, since the initial payments, as defined in section 212(d) of that Act, were more than 25 per cent of the selling price. The selling price was $60,000 and the cash received during 1920 was $17,000.
Judgment will be entered on 15 days' notice, umder Bule 50.
Considered by Littleton and Love.