Court Opinion

ID: 4497700
Source: CourtListenerOpinion
Date Created: 2020-01-23 18:15:33.929496+00
Date Added: 2024-06-11T15:04:05.249593
License: Public Domain

DisNey,
dissenting: I dissent. The mortgage foreclosure sale alone gave no right to deduction for loss in the taxable year because in Michigan the mortgagor has a 12-month period of redemption. Derby Realty Corporation, 35 B. T. A. 335. Any loss allowed in the taxable year must, therefore, be predicated upon the quitclaim deed from the mortgagor to the mortgagee-purchaser at foreclosure sale. The majority opinion states that there was no consideration for the quitclaim deed. If so, the mortgagor could set it aside at any time within the period of redemption, and would have suffered no loss within the taxable year. Such a release or acquittance as contained in the quitclaim deed here involved must be based upon consideration, 53 C. J. 1,200, and it seems obvious that, in the absence of such consideration, the mortgagor at any time within the 12-month period could have tendered the necessary amount of money to the mortgagee-purchaser and redeemed the land. Until his right so to do had terminated, it seems clear that he had suffered, and should be allowed, no loss, the identifiable event establishing same, to wit, termination of redemption period, not having yet occurred. The respondent in the deficiency notice seems to rely only upon the quitclaim deed as constituting the sale or exchange, within the purview of section 117. The petition likewise concerns itself only with the quitclaim deed and not with the mortgage foreclosure sale itself as constituting “sale or exchange” within the intendment of the statute; and the respondent upon brief contends that any deductible loss must be based upon the quitclaim deed, and not upon the fore*387closure proceedings, and that the loss is not allowable in 1934, prior to termination of tbe period of redemption.
It is apparent, therefore, that the question as to which is the year when loss occurred was a very real one in this proceeding. Without going into the question as to whether the quitclaim deed was by way of sale or exchange, I merely point out the anomalous situation of allowing loss in 1934, when the foreclosure itself did not become operative in that year, yet branding the quitclaim deed as without consideration. Under the Michigan statute, the mortgagor retains legal title and right to possession, throughout the year of redemption, the sheriff’s deed upon foreclosure is recorded only “for the better preservation thereof,” becomes “operative” only at termination of the 12-month period, in case of redemption becomes “void and of no effect”, and is destroyed by the register of deeds. I can not conceive of the holder of such right, which is subject only to an inchoate right on the part of the mortgagee, not yet operative, divesting himself thereof by a quitclaim deed, wholly without consideration so as to preclude himself from asserting right to redeem, and accelerate the incidence of his loss. Until he had lost the right to redeem, his claim to tax loss is as inoperative as the statute brands the foreclosure deed; and if there was consideration for the quitclaim deed there was sale or exchange, as respondent contends. I think the majority opinion poses a quandary, without answering the question propounded.