Court Opinion

ID: 4479682
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:13:48.488438+00
Date Added: 2024-06-11T14:53:58.425065
License: Public Domain

Smith, J., dissenting: If the petitioners had been unsuccessful in their suit in the Florida courts they would clearly not have been taxable upon any gains from the Orlando property in 1939. But they were successful. They obtained a decree from the court which permitted them to recover the property upon a payment to Markell of $54,354.67. If they had paid that amount of money and recovered full title to the property they would not have realized any taxable income from the transaction. They sold whatever rights they had under the decree of the court for a cash consideration of $17,067.67. That is all they received from such sale. How then can it be held that they realized taxable income upon such sale of $66,399.45, a part of which was capital gain and a part ordinary income? How can an actual gain of $17,-067.67 be transmuted into a taxable gain of $66,399.45? The Tax Court’s holding seems to me to be entirely unrealistic. The taxpayers can not have a taxable gain from the sale in 1939 of any greater amount than they actually received, namely, $17,067.67. The majority opinion intimates that the “petitioners mistakenly returned the earlier transaction [1931] as a sale” of the property in that year. I can not agree. The transaction with Markell took the form of a sale, with an option to repurchase at a higher price on or before June 15, 1933. The petitioners were under no obligation to repurchase. They had no obligation to repay any part of the $65,000 received by them from the vendees. In North American Oil Consolidated v. Burnet, 286 U. S. 417, it was held: * * * If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to. restore its equivalent. * * * In my opinion gain from the sale of property with an option to repurchase falls in the same category. Irving Fisher, 30 B. T. A. 433; Resthaven Memorial Cemetery, Inc., 43 B. T. A. 683. Taxation is an eminently practical matter. Tax laws should be given-a sensible construction. Incongruous results should be avoided. Cf. Dallas Transfer & Terminal Warehouse Co. v. Commissioner (C. C. A., 5th Cir.), 70 Fed. (2d) 95; Nichols v. Commissioner (C. C. A., 6th Cir.), 141 Fed. (2d) 870. I can see no practical or just reason for again including in the petitioners’ taxable income for 1939 profits which they reported, and I think properly, in 1931. The taxpayers, I think, should be taxed in 1939 upon only the $17,067.67 profit which they received in that year. ARUndeel and Disney, JJ., agree with this dissent.