Court Opinion

ID: 4487133
Source: CourtListenerOpinion
Date Created: 2020-01-17 22:00:35.281637+00
Date Added: 2024-06-11T07:58:36.373153
License: Public Domain

*1100OPINION.
Phillips:
In 1918 the taxpayer sold certain land, buildings, and equipment for $180,000. The Commissioner allowed a March 1, 1913, value of the property sold of $180,000, from which he deducted depreciation of $22,587.15, and on this basis computed a profit on this sale of $22,587.15. The taxpayer claims that the Commissioner erred in computing depreciation and in the determination of the March 1, 1913, value.
During each of the years 1916, 1917, and 1918, the taxpayer claimed and deducted depreciation at 5 per cent on an agreed value for the buildings of $60,000, but no depreciation was taken by it from March 1, 1913, to December 31, 1915, the taxpayer claiming that depreciation during these years had been arrested by repairs. The testimony does not sustain this contention and we have found that depreciation should be taken at the same rate for this period as was taken by the taxpayer in 1916, 1917, and 1918.
Testimony as to March 1, 1913, value of the land was conflicting. It appears that the property is situated in Memphis, Tennessee; is triangular in shape with a deep-water frontage of approximately 1,500 feet on the Mississippi River, the two sides of the triangle being approximately 1,000 feet each and the entire tract containing between 9y2 and 10 acres. There is a bluff which rises a short distance back from the river, and the warehouses of the taxpayer are situated on the high ground back of this bluff. There are facilities for unloading boats on the river by means of inclines to the top of the bluff. The property also had upon it in 1913 three railroad sidetracks providing sufficient space to permit loading and unloading of 45 cars. There were three large warehouses — one of wood, one of corrugated iron, and one of brick, all erected about 1902.
The taxpayer relied upon the testimony of a qualified real estate expert familiar with the property prior to 1913 who had dealt in nearby property and who, basing his opinions upon sales of property in the vicinity in 1911 and 1912, estimated the March 1, 1913, value of this land without the buildings at 60 cents per square foot, or a total of over $180,000. The lowest price upon any of these sales testified to by him was 48 cents per square foot, and this was for land on the river within 500 feet of the taxpayer’s property. The Commissioner relied upon the testimony of a valuation engineer who had never seen the property, was not familiar with values of land in the vicinity, and based his conclusions upon the rental received from a lease of a portion of the land, this lease being to one of the railroad companies upon which the taxpayer depended for cars to carry on its business. Upon this testimony we conclude that the March 1, 1913, value is most reasonably reflected at 48 cents per square foot, or a total of $145,000 for the land without buildings.
Since the property was sold in 1918 for an amount greater than cost but less than the March 1, 1913, market value, no taxable profit or deductible loss was sustained by the taxpayer, Goodrich v. Edwards, 255 U. S. 527; United States v. Flannery 268 U. S. 98. So far as the deficiency determined by the Commissioner was based upon including as income any gain upon this transaction, it must *1101be disallowed. As it is not clear from the record whether the entire deficiency resulted in this manner or a part from other adjustments, the final determination will be settled on consent or notice.