Opinion ID: 1793399
Heading Depth: 3
Heading Rank: 1

Heading: Tax Damages.

Text: ¶ 11. Examining the alleged damages of $478,803 in taxes, the lower court held that the Moore property was held primarily for sale. Because the property was held primarily for sale, it was not eligible for tax-deferred treatment under the tax code, regardless of any action or inaction by Taylor. ¶ 12. The relevant portion of Section 1031(a) of the tax code provides: (a) Nonrecognition of gain or loss from exchanges solely in kind. (1) In general. No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment. (2) Exception. This subsection shall not apply to any exchange of (A) stock in trade or other property held primarily for sale[.] 26 U.S.C.S. § 1031. ¶ 13. The exception stated in Section 1031(a)(2)(A) clearly excludes property held primarily for sale from tax-deferred treatment under Section 1031. Per this section, the owner of property held primarily for sale cannot use that property in a Section 1031 exchange and qualify for tax-exempt status. The question at issue is whether Callicutt held the Moore property primarily for sale so that the property could not have qualified for tax-deferred status regardless of action of inaction by Taylor. Furthermore, as Callicutt is a real-estate dealer, he has the burden of proving that when (he) dealt with the parcels of land (involved herein) (he) was wearing the hat of an investor rather than that of a dealer. Land Dynamics v. Comm'r, T.C.M. 259, 37 T.C.M. (CCH) 1119, 1978 WL 2945 (1978) (citing Pritchett v. Comm'r, 63 T.C. 149, 164, 1974 WL 2719 (1974)). ¶ 14. In his deposition, Callicutt admits that his original intent was to hold the property for sale: Q. When did youlet me ask it this way: When you purchased Moore Farms, was it your intention to resell that property at the time that your purchased it? A. Itit was not my intention to resell it as a whole. It was my intention to resell it one piece at a time. (Emphasis added). ¶ 15. After his deposition, it also came to light that Callicutt had entered into a contract to sell the land as a whole to Hurdle prior to his closing with Moore. Thus, the moment Callicutt acquired title to the Moore property, he immediately was contractually obliged to sell the property. ¶ 16. Normally, the question of whether property is held primarily for sale is a question of the taxpayer's intent, which in turn is a question of fact. Beeler v. Comm'r, T.C.M. 73, 73 T.C.M. (CCH) 1982, 1997 WL 52498 (1997) (citing Verito v. Comm'r, 43 T.C. 429, 441-42, 1965 WL 1212 (1965)). Callicutt argues that as a question of fact, it is reserved for the jury. However, the mere presence of a factual question does not automatically preclude summary judgment, as the party opposing the motion for summary judgment is required to set forth specific facts showing that genuine issues for trial do exist. See Richardson v. Norfolk & Southern Ry., 923 So.2d 1002, 1007 (Miss.2006). Callicutt filed an affidavit on February 26, 2006, after the briefs and the supplemental briefs for summary judgment were filed, asserting that it was not his intention to sell the property. The affidavit contradicted his earlier deposition testimony, as well as the contract to sell the land that he entered into with Hurdle. While the Court normally must resolve all factual inferences in favor of the nonmovant, the nonmovant cannot manufacture a disputed material fact where none exists. Thus, the nonmovant cannot defeat a motion for summary judgment by submitting an affidavit which directly contradicts, without explanation, his previous testimony. Foldes v. Hancock Bank, 554 So.2d 319, 321 (Miss.1989) (citations omitted). ¶ 17. Given Callicutt's previous testimony and the agreement he signed prior to taking ownership of the property, there can be little doubt about his intent when he acquired the, property. The trial court correctly held that he was unable to met his burden of showing the existence of any material fact for a jury with respect to the tax liability he claimed as damages. The tax court made a similar finding in Griffin v. Commissioner, 49 T.C. 253, 260, 1967 WL 1261 (1967), when it found that a Missouri property was held for sale and could not have been held for any other purpose because, prior to acquisition of the property, the petitioner had executed a binding contract to sell the property. Griffin, 49 T.C. at 260. Both Callicutt's decision to purchase the Moore property and his decision to enter into a contract to sell that property occurred before any consultation with Taylor. Accordingly, no action or inaction by Taylor resulted in the failure of the property to qualify for a Section 1031 exchange, and thus the tax damages claim of $478,803 properly was dismissed as a matter of law.