Court Opinion

ID: 4488098
Source: CourtListenerOpinion
Date Created: 2020-01-17 22:01:07.861244+00
Date Added: 2024-06-11T15:03:51.811278
License: Public Domain

Phillips,
dissenting: It is my opinion that in determining gain or loss upon the sale of residence property, proper adjustment must be made for the depreciation which took place while the property was so used.
It is not questioned that depreciation takes place in all such property. When one buys depreciable property and sells it after years of use, that which is sold is not the whole thing originally acquired. United States v. Ludey, 274 U. S. 295; Even Really Co., 1 B. T. A. 355. The residence has been used up in part; a part of its original cost has been recovered by use over the years. The amount of the cost which is used up in this manner by the owner represents a personal or living expense. Each of the revenue acts has expressly stated that such expenses shall not be deducted in computing taxable income. If, however, the owner is entitled to recover the full amount of his original cost, the effect is to allow him to deduct, in the year of sale, the depreciation which has taken place over the preceding years. Although- he has used up a part of his property, he is permitted to recover the cost of the property so used. To adapt a familiar apothegm, he has consumed a part of the loaf in his living, yet he is compensated for a full loaf. This, it seems to me, is not only contrary to the intendment of the revenue acts, but contrary to their express terms.
*717I do not regard this conclusion as contrary to the decision of the Supreme Court cited above and in the prevailing opinion; rather, I regard it as the logical application of the principle enunciated, applied in connection with the provisions of the revenue acts prohibiting the deduction of personal and living expenses. I therefore dissent from the conclusion reached in the prevailing opinion with respect to this issue. As to the remaining issues, I concur in the result.
SteiothageN, TRAmmell, Morris, Van FossaN, and Murdock concur in the dissent.