Court Opinion

ID: 4482481
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:15:30.813996+00
Date Added: 2024-06-11T14:54:01.876818
License: Public Domain

Quealy, /., dissenting: I must respectfully dissent from the majority’s decision. The majority’s application of a “cash equivalence” test is wholly unjustified in determining whether gain or loss has been realized under section 1001. See Heller Trust v. Commissioner, 382 F. 2d 675 (C.A. 9, 1967); Tombari v. Commissioner, 299 F. 2d 889 (C.A. 9, 1962); Kaufman v. Commissioner, 372 F. 2d 789 (C.A. 4, 1966); Estate of Lloyd G. Bell, 60 T.C. 469 (1973). In this case, the petitioner meets squarely the description of the willing seller under no compunction to sell. Bernard and Jo Ann Storey were willing buyers, equally without compunction. Stated simply, the willing seller sold or exchanged certain real property to the willing buyers under a land contract for a stated consideration of $153,000, comprised of $20,000 in cash and deferred payments in the amount of $133,000 bearing interest at 8 percent per annum, payable over a period of 15 years. The agreement was secured by the property and constituted the personal liability of the buyers who had ample resources to meet that obligation. There was a ready market for such contracts and they were freely traded in the community. In my view, the acceptance by the petitioner of a contract which provided for the payment of $133,000 plus interest over a period of 15 years, regardless of the discount which might result if petitioner had sought to sell the contract for cash, does not require the deferral of any accounting for the resulting gain over such term. In this respect, the situation presented is no different from the case where a mortgage is taken in exchange for real property. See dissenting opinion of Judge Turner, Nina J. Ennis, 17 T.C. 465 (1951). Under section 1001,1 the petitioner must compute its gain on the basis of the sum of any money received plus the fair marlcet value of the property (other than money) received. There is no dispute that the petitioner received money in the amount of $20,000. It also received a contractual obligation in the amount of $133,000 which a willing buyer would purchase for $117,980, conditioned upon a pledge back of a specified portion thereof.2 That contract must be deemed to constitute other “property” within the meaning of section 1001 (b). Accordingly, it is my opinion that the petitioner realized gain at the time of the sale, measured by the difference between the sum of the money received ($20,000) plus the fair market value of the remaining contract (a maximum of $117,980) and his basis for the property ($61,913.34). Such gain may be accounted for on the “installment basis” pursuant to the provisions of section 453. Sterrett, /., agrees with this dissent.   Sec. 1001 provides insofar as material herein : SEC. 1001. DETERMINATION OE AMOUNT OP AND RECOGNITION OP GAIN OR LOSS. (a) Computation op Gain or Loss. — The gain from the sale or other disposition of property shall be the excess of the amount realized therefrom over the adjusted basis provided in section 1011 for determining gain, and the loss shall be the excess of' the adjusted basis provided in such section for determining loss over the amount realized. (b) Amount Realized. — The amount realized from the sale or other disposition of property shall be the sum of any money received plus the fair market value of the property (other than money) received. * * *    The finding by the majority that the contract had a fair marlcet value in the amount of $76,980 ignores the stated fact that “petitioner could have sold this real estate contract to a buyer * * * for approximately $117,980” with the requirement that petitioner deposit $41,000 of that purchase price in a savings account assigned to the contract buyer as security. In my view, that amount must be taken into account in determining the “fair maTket value” of the contract. See Kaufman v. Commissioner, 372 P. 2d 789 (C.A. 4, 1966), remanding T.C. Memo. 1964-127.