Court Opinion

ID: 4611029
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:48:08.797465+00
Date Added: 2024-06-11T07:54:10.424720
License: Public Domain

MARY E. BOLAND, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.  WILLIAM P. BOLAND, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.  HONOR B. ADAMS, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.  MINER B. ADAMS AND HONOR R. ADAMS, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Boland v. CommissionerDocket Nos. 25111, 25112, 25200, 30661.United States Board of Tax Appeals21 B.T.A. 98; 1930 BTA LEXIS 1926; October 27, 1930, Promulgated 1930 BTA LEXIS 1926">*1926  The fair market value of certain real estate on the date it was acquired by the petitioners, determined.  William P. Boland, Esq., and Charles F. Hutchins, Esq., for the petitioners.  M. B. Leming, Esq., for the respondent.  MARQUETTE 21 B.T.A. 98">*98  These proceedings, which were duly consolidated for hearing and decision, are for the redetermination of deficiencies in income tax asserted by the respondent for the year 1925 as follows: Mary E. Boland, $2,959.84; William P. Boland, $2,774.44; and Miner B. Adams and Honor B. Adams, $3,001.60.  The deficiencies arise from the determination by the respondent that certain real estate that came to the petitioners Mary E. Boland, William P. Boland, and Honor B. Adams by inheritance on April 30, 1917, and was sold by them in 1925, had a fair market value of $96,812 on April 30, 1917, instead of a fair market value of $172,000 on that date as claimed by the petitioners and used by them in computing the profit from said sale.  21 B.T.A. 98">*99  FINDINGS OF FACT.  The petitioners are individuals residing in California.  William P. Boland, Mary E. Boland, and Honor B. Adams are brother and sisters, and Miner B. Adams1930 BTA LEXIS 1926">*1927  is the husband of Honor B. Adams.  On April 30, 1917, the petitioners, Mary E. Boland, William P. Boland, and Honor B. Adams, received in equal shares by inheritance from their mother, Annie Boland, a parcel of land situated at the northeast corner of Seventh and Alvarado Streets, Los Angeles, Calif., fronting 172.92 feet on Seventh Street and 95 feet on Alvarado Street, and improved with one-story and two-story frame store buildings.  This property was purchased by Annie Boland in 1903 for approximately $30,000.  At that time it was described as the southerly part of lots Nos. 75, 76, and 77 of the Westlake Park tract.  The property was later resubdivided and became known as lots Nos. 1, 2, 3 and 4 of tract 1759, remaining, however, the same size, to wit, 95 feet on Alvarado Street and 172.92 feet on Seventh Street.  An alley running north from Seventh Street constituted the eastern boundary of the property.  The fair market value of said real estate on April 30, 1917, was $154,000.  In October, 1918, the petitioners, Mary E. Boland, William P. Boland, and Honor B. Adams, purchased for $24,000, or $600 per front foot, a parcel of land ajoining on the north, for its full length1930 BTA LEXIS 1926">*1928  of 172.92 feet, the said real estate inherited by them from their mother, and fronting 40 feet on Alvarado Street.  The two parcels together formed a single tract extending 135 feet on Alvarado Street, and 172.92 feet on Seventh Street.  In October, 1920, the petitioners entered into a lease with the Owl Drug Co. covering said entire parcel of land, 135 feet by 172.92 feet, for a term of 25 years commencing January 1, 1921.  The rental for the first five years of the lease was fixed at the rate of $1,000 per month; for the second five years at the rate of $1,100 per month; for the third five years at the rate of $1,250 per month; for the fourth five years at the rate of $1,350 per month, and for the fifth and last period of five years at the rate of $1,400 per month.  The lease was a net or ground lease, under which the lessee maintained the improvements and paid all insurance, taxes, and other expenses necessary for the maintenance of the property.  In said lease the lessee was given an option to purchase said real estate at varying prices, to wit, during the first two years of the lease, $225,000; during the third year, $230,000; during the fourth year, $235,000; and during the1930 BTA LEXIS 1926">*1929  fifth year, $240,000.  In the fourth year of the lease the lessee elected to exercise its option and in 1925 said property was conveyed to the lessee.  The 21 B.T.A. 98">*100  petitioners were paid therefor $234,013.75, which represented the agreed purchase price less expenses of sale.  The petitioners, in their income-tax returns for the year 1925, reported that the fair market value of the said real estate, 95 feet on Alvarado Street and 172.92 feet on Seventh Street, inherited by them from their mother on April 30, 1917, had a fair market value of $172,000 on that date, and that the entire profit from said sale in 1925 was $38,313.75.  The profit so computed was returned as income by the petitioners as follows: Mary E. Boland, $12,771.25; William P. Boland, $12,771.25; and Miner B. Adams and Honor B. Adams (joint return), $12,771.25.  The respondent, upon audit of the returns, determined that the fair market value of the real estate inherited by the petitioners from their mother was $96,812 on April 30, 1917, and that there was a profit realized by them from the sale in 1925 in the amount of $113,501.75.  He therefore increased the incomes of the petitioners for 1925 accordingly, and1930 BTA LEXIS 1926">*1930  determined deficiencies in tax as above set forth.  OPINION.  MARQUETTE: This proceeding presents a single question of fact: namely, What was the fair market value on April 30, 1917, of the parcel of land situated at the northeast corner of Seventh and Alvarado Streets, Los Angeles, Calif., fronting 172.92 feet on Seventh Street and 95 feet on Alvarado Street?  This real estate came to the petitioners, Mary E. Boland, William P. Boland, and Honor B. Adams, by inheritance from their mother, who died on April 30, 1917, and it was sold by them in 1925, together with another parcel of land contiguous thereto which they had subsequently purchased.  The petitioners, in computing the profits from the sale, used a fair market value of $172,000 on April 30, 1917, for the said real estate inherited by them.  To that amount they added the cost of the additional real estate they had purchased and deducted the total from the selling price.  The profit thus determined was reported by the petitioners in their tax returns for 1925 according to their respective interests therein.  The respondent, upon audit of the returns, determined that the fair market value of the real estate inherited by the1930 BTA LEXIS 1926">*1931  petitioners was $96,182 on April 30, 1917, and he recomputed the profit from the sale on that basis, increased the respective incomes of the petitioners accordingly, and determined the deficiencies in tax that give rise to this action.  At the hearing the respondent asked that the Board find that the fair market value of the real estate in question was between $81,000 and $85,000, and that the deficiencies he increased accordingly.  21 B.T.A. 98">*101  The evidence presented herein is voluminous and consists of more than 140 pages of testimony, together with certain exhibits.  The ten witnesses who appeared were, with one exception, real estate dealers or real estate appraisers, and all of them testified as to the fair market value of the property involved on April 30, 1917.  It would be wholly impracticable to go into detail as to their respective opinions and the facts upon which these opinions were based.  It is sufficient to say that while they were not in entire accord either as to the value of the property or its relative value and importance as compared to other property in the vicinity, we are satisfied that their testimony warrants the conclusion that the fair market value of the1930 BTA LEXIS 1926">*1932  property on April 30, 1917, was $154,000, and we so hold.  Decision will be entered under Rule 50.