Sullivan v. Commissioner , 23 B.T.A. 147 ( 1931 )

J. EDWARD SULLIVAN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Sullivan v. Commissioner

Docket No. 29616.

United States Board of Tax Appeals

23 B.T.A. 147; 1931 BTA LEXIS 1923;

May 11, 1931, Promulgated

---

">*1923 Commissions and escrow expenses paid in connection with an installment sale of real property by one not a dealer in real property are not deductible in the year of sale, but are added to cost and serve to reduce the profit, thus being spread over the same period as the installment payments.

Claude I. Parker, Esq., George H. Koster, Esq., and John B. Milliken, Esq., for the petitioner.

J. L. Backstrom, Esq., for the respondent.

---

MATTHEWS

">*147 This is a proceeding for the redetermination of a deficiency in income tax for the year 1924 in the amount of $23.30. The only error alleged is that the Commissioner erred in not allowing as a deduction in the year 1924 the full amount of commissions and escrow expenses incurred and paid within that year for services rendered in connection with an installment sale of real estate. The proceeding was submitted upon the pleadings and a stipulation.

FINDINGS OF FACT.

The petitioner is an individual, a resident of Los Angeles, Calif.

The petitioner's records are kept on the basis of cash receipts and disbursements.

In the year 1924 the petitioner sold a piece of real estate for a total consideration">*1924 of $50,000. The cost of said real estate was $10,000. The petitioner received an initial payment of $10,000 upon the sale, the balance being payable in installments, and the profit therefrom was reported upon the installment sales basis.

In connection with the sale the petitioner paid in the year 1924 an amount of $2,500 as commissions and an amount of $182 as escrow expenses. The services for which these expenses were incurred were completed within the year 1924.

">*148 The respondent, in determining the amount of profit to be returned in installments, added the amount of the commissions and escrow expenses to the cost of the property sold.

The petitioner during the year 1924 was not a dealer in real estate nor engaged in the business of buying and selling real estate.

OPINION.

MATTHEWS: The issue involved in the present proceeding is the same as that involved in the case of . In that case we held that, where real estate was sold by one not a dealer and the profit therefrom reported upon the installment sales basis, expenses incurred in connection therewith were not deductible as ordinary and necessary business expenses">*1925 in the year of the sale but served to reduce the "total profit realized or to be realized," thus being spread over the same period as the installment payments. See also .

We are, therefore, of the opinion that the action of the respondent in disallowing the deduction for the expenses in question in 1924 was correct.

Judgment will be entered for the respondent.