Empire Loan & Trust Co. v. Commissioner , 13 B.T.A. 633 ( 1928 )

EMPIRE LOAN & TRUST CO. AND EMPIRE LAND CO., PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Empire Loan & Trust Co. v. Commissioner

Docket No. 18410.

United States Board of Tax Appeals

13 B.T.A. 633; 1928 BTA LEXIS 3206;

September 28, 1928, Promulgated

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The respondent having determined a taxable gain resulting from an exchange of one farm for another in 1918, the burden of proof is on the petitioner to show that no such gain was realized in such transaction.

R. M. Cornwall, Esq., for the petitioners.

Benton Baker, Esq., for the respondent.

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LANSDON

The respondent has asserted deficiencies in income and profits tax for the year 1918 in the respective amounts of $2,060.61 and $452.22, and has also denied a claim for abatement of tax shown to be due on the original return of the petitioners, who appeal from the determination of deficiencies and also ask for substantial refunds. The only issue is whether a certain transaction in real estate was a nontaxable exchange under the provisions of section 202(b) of the Revenue Act of 1918.

FINDINGS OF FACT.

The facts have been stipulated, as follows:

(1) That the petitioners are corporations organized and existing under and by virtue of the laws of the State of Iowa, and have principal offices and places of business at Sheldon, in the county of O'Brien, and State of Iowa; that each stockholder of one of the said corporations is the owner and holder of shares in the other corporation in like proportion; and that the petitioner corporations are affiliated as provided in section 240 of the Revenue Act of 1918.

(2) That the taxes in controversy are income and profits taxes for the calendar year 1918 in the sum of $2,060.61 for the Empire Loan & Trust Co., and $452.22 for the Empire Land Co.

(3) That the Empire Land Co., through one C. O. Button, acting on its behalf, on the 23rd day of July, 1917, entered into reciprocal contracts with one A. Van Meeteren, copies of which contracts have been submitted in evidence.

(4) That the said contracts were executed by the transfer of the real property therein described by warranty deeds on or about March 18, 1918, except that there was no actual payment on either part of the cash consideration, namely the amount of $1,000, specified in either contract. The Empire Land Co., however, paid to the said A. Van Meeteren the sum of $2,600 in cash and assumed a then existing first mortgage of $20,000 upon the tract of land described in the contract identified as Exhibit "B." The said A. Van Meeteren assumed a then existing first mortgage of $15,000 on the tract of land described in the contract identified as Exhibit "A."

OPINION.

LANSDON: The petitioners contend that the Commissioner erroneously determined that the transaction here in question resulted in taxable gain in 1918. Section 202(b) of the Revenue Act of 1918, so far as applicable here, is as follows:

When property is exchanged for other property, the property received in exchange shall for the purpose of determining gain or loss be treated as the equivalent of cash to the amount of its fair market value, if any; * * *

Consideration of the above statutory provision convinces us that whether a deductible loss or a taxable gain results from an exchange of property is wholly a matter of fact. The Commissioner having determined that the transaction in question resulted in a taxable gain, the burden of proof in support of his contention is on the petitioner. No evidence as to the fair market value of the property received by the petitioner or of that exchanged therefor was offered at the hearing. The determination of the respondent is approved.

Decision will be entered for the respondent.