Court Opinion

ID: 4610049
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:46:02.704982+00
Date Added: 2024-06-11T07:53:59.906478
License: Public Domain

BARBARA KONOLD, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Konold v. CommissionerDocket No. 9670.United States Board of Tax Appeals9 B.T.A. 1194; 1928 BTA LEXIS 4277; January 12, 1928, Promulgated *4277  1.  March 1, 1913, value of certain real estate determined.  2.  Evidence held insufficient to warrant a change in respondent's determination of income from other sources.  William J. Kennedy, Esq., and A. C. Frodel, for the petitioner.  Thomas Martinez Wilkins, Esq., for the respondent.  GREEN *1194  In this proceeding the petitioner seeks a redetermination of her income-tax liability for the years 1921 and 1922, for which years the respondent has determined deficiencies in the amounts of $604.46 and $9,638.85, respectively.  The petition alleges that the respondent erred, (1) in computing the profit resulting from the sale of certain real estate; (2) in including in income an estamated amount of interest in the amount of $2,092.05 and also the amount of $17,024.23, representing her proportionate share of the corrected surplus of a corporation whose assets she received as a liquidating dividend on distribution; and (3) in not including in income salaries and rents previously received from said corporation.  *1195  The petitioner is an individual residing at New Haven, Conn.  In The petitioner is an individual residing at NewHaven, *4278 Conn.  In 1921 she sold a parcel of land situated on Ferry and Chapel Streets in New Haven for $14,000.  For local tax purposes for the year 1913, this land was assessed at $2,310 and the buildings thereon at $3,990.  In computing the taxable gain on the transaction, the respondent concluded that the fair market value on March 1, 1913, exceeded the assessed valuation by 25 per cent, and using the value so arrived at as the basis, computed the gain by deducting depreciation on the increased value of the buildings computed on the basis of 3 per cent over a period of seven years, taking no depreciation for the year of sale, with a resulting gain of $6,717.20, which amount he added to income.  In 1922 the petitioner sold two parcels of land in the City of New Haven, one on River and Ferry Streets for $50,000, and one at 144 Ferry Street for $30,000.  For local tax purposes for the year 1913, the land at River and Ferry Streets was assessed at $9,285 and the buildings thereon at $6,025, and the land at 144 Ferry Street was taxable gain on these transactions, the respondent determined the taxable gain on these transactions, the respndent determined the fair market value on March 1, 1913, by*4279  increasing the assessed valuation 25 per cent and deducted depreciation on the increased value of the buildings computed on the basis of 3 per cent for eight years, which resulted in a gain of $58,378.51, which amount he added to income.  The above real estate was situated in a manufacturing district and was all served by railroad trackage and wharfage.  The property of the petitioner was improved with coal chutes and one or two tenement houses, and had been used by the family of the petitioner for more than 30 years in the coal business.  In the immediate vicinity were located the Yale Brewery and, until the business was restricted by local health regulations, several large wholesale oyster shippers.  Sometime between 1913 and 1922 a Ford assembly plant, a large wholesale grocery warehouse, and the manufacturing plant of the Adamant Plaster Co. were built in the vicinity.  A witness who had qualified as an expert testified to the effect that the petitioner's property at Ferry and Chapel Streets was worth $13,000 on March 1, 1913, and that the value of the other two parcels was as great on March 1, 1913, as at the time of the subsequent sales.  This same witness was unable to*4280  give any evidence either as to the construction or condition of the improvements located on the above premises for the purpose of determining depreciation.  The respondent in computing the petitioner's income for the taxable year 1922 included $2,092.05 as interest received from various *1196  sources and also the amount of $17,024.23 as representing the petitioner's proportionate share of the liquidating dividend received from the H. konold & Sons Co. at the time of its dissolution.  The respondent determined a deficiency of $604.46 for the taxable year 1921 and a deficiency of $9,638.85 for the taxable year 1922, making an aggregate deficiency of $10,243.31.  OPINION.  GREEN: The petitioner alleges that the respondent erred in computing the gain derived from the sale of certain real estate.  The respondent, in determining the gain from these real estate transactions, used the assessed value of this real estate as representing 75 per cent of its fair market value on March 1, 1913.  The petitioner has shown that the property at Ferry and Chapel Streets was worth $13,000 on March 1, 1913, and that the other two parcels had as great a value on this date as at the dates*4281  of their respective sales.  Since the petitioner has offered no evidence as to how the value of the real estate should be allocated as between land and buildings nor as to the rate of depreciation applicable to the buildings, we believe that such allocation should be made on the same proportions as were used by the respondent in his deficiency letter, and that the value thus allocated to buildings should be depreciated at the same rate as used by the respondent.  Since the petitioner has failed to prove cost, the gain must be computed by subtracting from the sale price the March 1, 1913, value reduced by the allowable depreciation.  As to the alleged errors in including the amounts of $2,092.05, representing interest, and $17,024.23, representing the liquidating dividend received on distribution, in the petitioner's gross income for the year 1922, the responsibility rested upon the petitioner to show what her correct income was for that period.  Not a shred of evidence was offered by the petitioner to show that her income from these sources was something other than that determined by the respondent.  On the record confronting us, we must hold that the petitioner has failed to prove*4282  the allegation of error that the respondent has overstated the net income for the taxable year 1922.  As to the third assignment of error, the petitioner has alleged as to the years 1921 and 1922, "Salaries and rents received from the H. Konold & Sons Co. should be allowed to be included in her personal income for said years." The respondent denied generally that an error had been committed.  It was intimated at the hearing that the petitioner expected to have the matter of these salaries and rents adjudicated in the case of H. Konold & Sons Co., Docket No.  *1197  7665, then pending before this Board.  This case was dismissed on May 4, 1926, on motion of the Commissioner for the reason that the petition for redetermination was not filed with the Board within 60 days from the mailing of the deficiency notice.  No evidence was offered relative to these salaries and rents, and on the record as it stands we are compelled to accept the respondent's determination, except in the case of the above mentioned real estate, as correct.  Judgment will be entered on 15 days' notice, under Rule 50.