Opinion ID: 1793399
Heading Depth: 2
Heading Rank: 1

Heading: As a matter of law, did Callicutt suffer damages as a result of the alleged misconduct?

Text: ¶ 10. The primary issue in this case is what, if any, damages Callicutt can claim as a result of Taylor's alleged misconduct. Callicutt contends the following damages resulted from the alleged unlawful acts or omissions of Taylor: (1) $478,803 in taxes he claims could have been deferred under a properly-executed Section 1031 exchange; (2)$1,079,791.11 in lost future lease income resulting from his need to sell property to pay the taxes; (3) $18,992.89 in damages representing the penalties and interest he paid on the taxes that he was unable to defer; and (4) $13,943 as his cost of borrowing money in order to pay the taxes.
¶ 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.
¶ 18. Callicutt further claims damages of $1,079,791.11 for lost future lease income on a piece of property he was allegedly forced to sell in order to pay the taxes on the failed Section 1031 exchange. He alleges these damages were a direct consequence of the $478,803 tax liability Callicutt was forced to pay. As previously discussed, these taxes were not damages resulting from any action or inaction of Taylor. Callicutt held the property primarily for sale, and therefore, the transaction could not have qualified for Section 1031, tax-deferred treatment under any circumstances. Therefore, Taylor cannot be held liable for any actions that Callicutt was forced to take to pay taxes for which he would have been responsible with or without any involvement by Taylor. As a matter of law, the lost future profits were not the result of any conduct on the part of Taylor, and thus, summary judgment was appropriate.
¶ 19. Callicutt also claims damages of $18,992.89 in penalties and interest as a result of the taxes he was unable to defer, as well as damages of $13,943 incurred when he had to borrow money to pay the taxes due on the property sale. Callicutt would have owed the taxes regardless of any alleged injurious conduct of Taylor. However, Callicutt claims that his damages included penalties and interest incurred by the delay in his payment of those taxes and damages for having to borrow money to pay the taxes due on the property. Clearly, the property never qualified for a Section 1031 exchange. The property was disqualified for a like-kind exchange before Callicutt ever had any dealings with Taylor. Furthermore, to the extent that Callicutt may have had to incur costs to borrow money to pay the taxes for the Moore property, Taylor's actions or inactions had no bearing on the liquidity of Callicutt's assets to pay his tax liability for the Moore property. Despite the failure of the Moore property to qualify as a Section 1031, like-kind exchange, the issue of these incidental damages will be discussed more fully under the following fiduciary-duty issue.