Court Opinion

ID: 4627989
Source: CourtListenerOpinion
Date Created: 2020-11-21 03:02:24.526517+00
Date Added: 2024-06-11T07:57:08.337523
License: Public Domain

TOM MAY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.May v. CommissionerDocket No. 22528.United States Board of Tax Appeals20 B.T.A. 1211; 1930 BTA LEXIS 1955; October 9, 1930, Promulgated 1930 BTA LEXIS 1955">*1955  Petitioner held not entitled to the deduction of an alleged loss resulting from the sale in 1923 of residential property given him by his father as a personal home after his marriage and never used otherwise by petitioner.  Dan J. Chapin, Esq., for the petitioner.  C. H. Curl, Esq., for the respondent.  SEAWELL20 B.T.A. 1211">*1211  The Commissioner determined a deficiency in income tax for the calendar year 1923 in the amount of $17,524.50.  The sole question for our determination is whether the Commissioner erred in disallowing as a deduction an alleged loss sustained by the petitioner in the sale of residential property in 1923.  The case is submitted on allegations in the petition admitted in the answer, deposition of one witness, stipulation, and testimony at the hearing.  FINDINGS OF FACT.  The petitioner is a resident of Los Angeles, Calif.After petitioner became engaged and several months prior to his marriage in 1911 his father proposed to give him as a wedding present a home, to cost not in excess of $100,000.  The petitioner preferred cash.  The father refused to make a cash gift because the son was investing in stocks and bonds, which1930 BTA LEXIS 1955">*1956  the father considered hazardous.  The father's desire was that the son might have a home near him and in 1912 they together selected a lot in a restricted residential section of St. Louis, Mo., near the father's home, for which lot he paid $17,500 and had the deed thereto made to his son.  The house erected thereon was completed early in 1913 at a cost of $73,139.61, which the father paid, making the amount of his gifts to his son $90,639.61.  20 B.T.A. 1211">*1212  The petitioner and his wife moved into the residence in 1913 and made it their home until the latter part of 1922, when they moved to Los Angeles, Calif.  The residence was of stucco on brick construction and had a life of fifty years.  It is stipulated that a 2 per cent depreciation on the residence would be applicable if any deductible loss on sale is allowable.  During 1911 and 1912 the petitioner owned no home.  It was thought by the petitioner at the time he was given the home that its value would increase and he might realize a profit whenever it was sold, and for a satisfactory profit the place was for sale soon after its acquisition.  Petitioner made some effort to sell the home at $110,000 about 1915 or 1916 and in1930 BTA LEXIS 1955">*1957  1917 it was offered for sale to Adolphus Busch of St. Louis, but no sale was effected.  Petitioner learned that certain restrictions were taken off certain near-by lots, thus permitting in or about 1918, apartments to be built thereon which, such being built, resulted in objections being raised to the purchase of the home by prospective buyers, as the use of soft coal by the apartments made a lot of smoke and restrictions on the petitioner's home lot prevented the erection of any apartment thereon.  In 1920 petitioner put his home in the hands of a real estate dealer for sale, where it remained for six or eight months, but Busch was the only prospective purchaser who would have paid a profit thereon and he did not buy it.  The property was also placed in the hands of another realtor in the same year, 1920, but no satisfactory purchaser was found.  In June, 1923, after the petitioner had moved away from St. Louis, the property was sold for $51,000, on which sale a commission of $2,096 was paid by the petitioner.  The house was occupied by the petitioner as his private residence from the time of its completion in 1913 until the latter part of 1922.  After he ceased to occupy it as1930 BTA LEXIS 1955">*1958  his private residence because of his removal from St. Louis it was not leased or rented before its sale.  OPINION.  SEAWELL: If the petitioner is entitled to a deduction because of the alleged loss sustained in the sale of his residence in the taxable year, it must be allowable under section 214 of the Revenue Act of 1921, which provides in part as follows: SEC. 214. (a) That in computing net income there shall be allowed as deductions: * * * (5) Losses sustained during the taxable year and not compensated for by insurance or otherwise, if incurred in any transaction entered into for profit, though not connected with the trade or business; * * * 20 B.T.A. 1211">*1213  Whether the acquisitions of petitioner's lot and residence by gifts from his father in 1912 and 1913 were transactions entered into for profit within the meaning of the statute quoted is the question for our determination.  The property cost the petitioner nothing.  He desired what his father gave him should be cash, but the evidence shows the father refused to make such a gift because he feared it might be lost in speculation and he wished his son to have a home and preferred his son's home should be near his own, 1930 BTA LEXIS 1955">*1959  and with the intent and for the purpose indicated the lot was purchased and the residence erected and both paid for by the father.  The fact that both father and son thought the location of the home in a restricted and desirable residential section might result in a profit whenever the same should be sold does not, in our opinion, in the circumstances of this case, indicate that the investment in such home was a transaction entered into for profit in the sense of the statute.  The idea of a home for the son was the predominating idea when the gifts were made.  The petitioner cites a number of cases decided by this Board as sustaining his contention.  We do not deem it necessary, however, to discuss in detail all the cases relied on by the petitioner.  It is evident from the record in the instant case that the predominating idea in the transactions between the father and son, whereby the latter acquired his home, was that the son might have a home near the father.  The facts that the father would not give his son cash instead of the home and that the son accepted the home in the circumstances detailed in the evidence show that a valuable home for the son and not a sale of the same1930 BTA LEXIS 1955">*1960  for profit was the predominating idea in the transaction between father and son whereby the latter acquired his home.  The facts in the instant case are quite different from those in ; ; and , relied on by the petitioner.  In those cases the predominating idea at the time of the acquisition of the property was a sale for profit.  In the instant case, the petitioner never leased or rented his residence with a view to making it income-producing property, but continued to occupy it as a residence until the latter part of 1922, when he moved to Los Angeles, Calif.  It was sold in June, 1923.  We are of the opinion that the facts and circumstances of this case are not such as to entitle the petitioner to a deductible loss as claimed, the transactions by which he acquired his home not having been entered into for profit.  Our decision herein is controlled by , affirmed by the 1930 BTA LEXIS 1955">*1961 , and . Judgment will be entered for the respondent.