Court Opinion

ID: 4600830
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:26:23.385355+00
Date Added: 2024-06-11T07:52:22.810563
License: Public Domain

JOSEPH RITER, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Riter v. CommissionerDocket No. 14392.United States Board of Tax Appeals13 B.T.A. 57; 1928 BTA LEXIS 3322; July 25, 1928, Promulgated 1928 BTA LEXIS 3322">*3322  The value as of September 30, 1913, of two adjoining parcels of real estate determined.  Ewing Laporte, Esq., for the petitioner.  Frank S. Easby-Smith, Esq., for the respondent.  MORRIS13 B.T.A. 57">*57  This proceeding is for the redetermination of a deficiency of $1,136.93 income taxes for 1920.  The issue presented is the fair market value of two parcels of real estate on September 30, 1913.  FINDINGS OF FACT.  The petitioner acquired on September 30, 1913, by inheritance from his mother, two adjoining parcels of land with the improvements thereon, located at 600 and 620 South Negley Avenue, Pittsburgh, Pa.13 B.T.A. 57">*58  The premises at 600 South Negley Avenue were acquired by petitioner's father in 1891 at a cost of $25,000.  The house acquired was a large and commodious 2 1/2-story brick building, plain and simple in design, and finished with ordinary soft grain wood.  The elder Riter made improvements and alterations on the house from time to time, and particularly in 1901, when he employed an architect and made extensive improvements and alterations at a cost of approximately $13,000.  The old woodwork and finish were replaced with solid mahogany, 1928 BTA LEXIS 3322">*3323  hardwood floors and tile work.  An old bathroom was moved from the second to the third floor and a new completely modern bathroom installed on the second floor.  Other improvements consisted of new cement sidewalks and steps, a new porch, an extensive heating plant, cementing the cellar, installation of slate, and later, porcelain tubs, cupboards and closet space, and other imorovements of a like nature.  The elder Riter was constantly improving the premises and the estimated cost thereof was approximately $25,000.  The premises at 620 South Negley Avenue, consisting of the lot and a 2 1/2-story frame house, were acquired by petitioner's father in 1905 or 1906 at a cost of $16,250.  He immediately improved it by adding a porch in the rear, enlarging the front porch, and putting in hardwood floors, at a total cost of $2,474.36.  During the same year, 1906, he constructed a two-story brick stable at a cost of 7,500, and a brick garage as an addition to the stable at a cost of $1,313.87.  During the same period of time the lots were graded and concrete walks and drive put down at an estimated cost of $828.  The corner lot had a frontage of 85 feet on Ellsworth Avenue, and 169 feet1928 BTA LEXIS 3322">*3324  on South Negley Avenue, with a total area of 13,474 square feet.  The lot at 620 South Negley Avenue had a total area of 7,803 square feet, with a 10-foot alley along the entire length of one side.  In 1913 these two parcels of real estate were located in a high-class residential section of Pittsburgh, the four corners at Ellsworth Avenue and South Negley Avenue being occupied by four millionaires.  There were very few sales of property in this vicinity in 1913 or during the years prior thereto.  In 1908 a corner lot in the same block, but at Elmer and South Negley, containing 6,976 square feet, sold for 41.60 per square foot.  A second corner at the same intersection containing 7,942 square feet sold in July, 1910, for $1.51 per square foot.  Both of these corners were occupied by old buildings which were torn down and removed.  Neither corner was as valuable as the premises at 600 South Negley Avenue.  A third sale of a corner property located on side streets was made at $1.23 per square foot.  13 B.T.A. 57">*59  The fair market value of the premises at 600 South Negley Avenue on September 30, 1913, was $50,000, the land being included therein at $1.25 per square foot.  The value of1928 BTA LEXIS 3322">*3325  the premises at 620 South Negley Avenue on September 30, 1913, was $18,000, the land being included therein at $1.10 per square foot.  The petitioner has never resided in either of the properties since he inherited them, but has rented them for $125 and $75, respectively, to tenants who would care for and keep them in good condition.  The neighborhood subsequent to 1913 has gradually changed from a residential to a commercial section.  On February 6, 1920, petitioner being in need of cash sold both properties for $35,000, after having had them on the market for about 30 days.  In preparing the petitioner's return for 1920 his attorney included this property in the return at a value of $50,000, which amount the attorney considered represented the 1913 value depreciated to 1920, and he claimed therefore a loss of $15,000 on the sale.  The respondent considered the $50,000 as the value of the property on September 30, 1913, and reduced this amount by depreciation to the date of sale on the value allocated to the buildings, which computation resulted in a deficiency of $1,136.93.  OPINION.  MORRIS: We have presented for determination the question of value on two parcels of real1928 BTA LEXIS 3322">*3326  estate on September 30, 1913, which property was subsequently sold for $35,000.  The petitioner asserts that the properties had a fair market value of not less than $70,000 when he inherited them.  The respondent has used a valuation of $50,000 as shown by petitioner's return for 1920, and reduced this value by depreciation on the buildings sustained between September 30, 1913, and February 6, 1920, the date of sale.  After considering the evidence adduced by the petitioner, we have found as a fact that the two parcels had a fair market value in 1913 of $68,000.  This valuation is supported by the testimony showing original costs, the costs of improvements and additions, the sales of less advantageously located properties in the vicinity, and by the testimony of a real-estate broker who was thoroughly conversant with the property throughout the period in question.  The amount of the loss should be recomputed in accordance with the foregoing valuation, due allowance being made for depreciation sustained on the buildings.  Judgment will be entered under Rule 50.