Holloway v. Commissioner , 19 B.T.A. 378 ( 1930 )

W. W. HOLLOWAY, ADMINISTRATOR, ESTATE OF ANDREW GLASS, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Holloway v. Commissioner

Docket No. 28361.

United States Board of Tax Appeals

19 B.T.A. 378; 1930 BTA LEXIS 2410;

March 24, 1930, Promulgated

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Deduction for alleged loss resulting from sale of residential property allowed.

William Ristig, Esq., for the petitioner.

C. H. Curl, Esq., for the respondent.

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SEAWELL

The Commissioner determined a deficiency in income tax of $1,886.89 for the year 1922 and an overassessment of $59.74 for the year 1923.

The deficiency results from the refusal of the Commissioner to allow as a proper deduction from income an alleged loss on the sale in 1922 of residential property occupied for a time by the taxpayer as a personal residence. The case is submitted on allegations in the petition admitted in the answer, the testimony of the widow of the deceased taxpayer and an affidavit of hers filed as an exhibit.

FINDINGS OF FACT.

The petitioner is a resident of Wheeling, W. Va.

Andrew Glass, the deceased taxpayer, owned stock in and was vice president of the Wheeling Steel Corporation and was then in charge of operations there.

August 2, 1920, he married the witness who testified at the hearing January 13, 1930, and whose affidavit of February 23, 1927, is filed as an exhibit.

For a few months after their marriage they resided first in a hotel and then in an apartment. In October or November following their marriage they purchased a stucco residence in Wheeling for $22,500, furnished it throughout, and moved into it. At the time of the purchase they did not know how long Andrew Glass might be employed or remain with the Wheeling Steel Corporation, as his health was then declining.

The residence was well located and at the time of its purchase was represented to both of them, by the real estate broker, as being a good investment. The property was bought primarily as an investment and secondarily to live in. It was not bought with the idea of a permanent home. It was understood between the purchasers and the real estate broker, at the time of purchase, that the property was always for sale at a nice profit and they had prospective purchasers for the place.

Glass got sick very soon after the marriage, not sick in bed, but was visiting doctors in Cincinnati in regard to his health, and later was advised to leave Wheeling on account of his health.

In July, 1922, he severed his connection with the Wheeling Steel Corporation and accepted a position in Pelham, N.Y., purchased a residence in Pelham Heights, and acquired a legal residence there.

From the time they moved to New York, the Glass residence in Wheeling was held for investment purposes and was either for rent or for sale.

Soon after moving to New York in 1922 the Wheeling residence was sold for $15,264.66, being $7,235.34 less than original cost, and on such basis loss deduction is claimed.

In the computation of the deficiency tax, as determined by the Commissioner, there was no allowance made for depreciation.

OPINION.

SEAWELL: Section 214 of the Revenue Act of 1921 provides, among other things, that an individual shall be allowed deductions in the computation of net income for "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."

As to the deductibility of the amount of the loss sustained in the computation of his net income for 1922, the petitioner cites and relies on several cases decided by the Board.

The facts and circumstances in the instant case are such that there is no necessity for a discussion of the same in much detail.

The seeming inconsistency or conflict between the testimony of the only witness in the case and her affidavit touching the reasons for and conditions under which the purchase of the Wheeling residence was made is not, in our opinion, very material or important, in the light of her full and positive testimony at the hearing, in which she makes it plain and clear that the predominating idea in her husband making the purchase of the Wheeling residence was a transaction entered into for profit and not with a view of a permanent home or residence.

She was present when the inducement, gain or profit, in the purchase and subsequent sale of the residence was presented to her husband by the real estate broker and knew whereof she testified.

In our opinion the evidence brings the case within the rule laid down in , wherein we said:

A review of the cases bearing upon this question reveals to us that where a taxpayer acquires property with the intention of selling it at a profit, even though he may have resided thereon, if the predominating factor in its selection was the prospect of future profits, he is entitled to any loss sustained upon the sale thereof. See ; ; ; ; and .

It is agreed that the property in question cost $22,500 and was sold for $15,264.66, indicating a loss of $7,235.34. Such amount should be adjusted for depreciation sustained.

Judgment will be entered under Rule 50.