Court Opinion

ID: 9460704
Source: CourtListenerOpinion
Date Created: 2023-08-04 21:58:17.029144+00
Date Added: 2024-06-11T17:36:44.744446
License: Public Domain

ORDER ON PETITION FOR REHEARING
On petition for rehearing and suggestion for rehearing en banc taxpayers-*496Vestals contend our decision conflicts with Diamond v. Commissioner, 492 F.2d 286 (7th Cir. 1974), affirming 56 T.C. 530 (1971). Although Diamond was not cited to us previously, we do not find that decision inconsistent with our holding in Vestal.
In Diamond, the taxpayer was a mortgage broker who, along with a third party who held a contract to purchase an office building, agreed in 1961 to purchase and operate the building as a joint venture. They consummated the purchase in February, 1962, and shortly thereafter Diamond sold his interest for $40,000, and sought to account for these proceeds as a short term capital gain on his 1962 income tax return. The Seventh Circuit, in agreement with the Tax Court, rejected the plaintiff’s contention and held the sum to be ordinary income. The Seventh Circuit also stated that even if capital gain treatment were appropriate, no gain had occurred for, as the Tax Court determined, the value of Diamond’s partnership interest as received on February 18, 1962, and as sold a few weeks later, amounted to $40,000.
Aside from certain aspects of partnership tax law, not present in the Vestal case, the determination that Diamond received ordinary income in the tax year of 1962 and the court’s statement that “the receipt of a profit-share with determinable market value is income,” 492 F.2d at 291, is consistent with our holding in Vestal. In Diamond, the taxable event occurred in 1962, when the parties actually acquired the building to be held as a joint venture, not in the prior year when the preliminary contract was made. Similarly, in Vestal; we hold that the taxable event occurred upon acquisition of the actual joint venture interest by Vestal, not in an earlier year upon execution of the initial contract between Vestal and the El Dorado investors.
Accordingly, the petition for rehearing is denied.