Nalle v. Commissioner , 19 B.T.A. 427 ( 1930 )

BRODIE C. NALLE, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Nalle v. Commissioner

Docket No. 39490.

United States Board of Tax Appeals

19 B.T.A. 427; 1930 BTA LEXIS 2401;

March 28, 1930, Promulgated

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">*2401 The respondent's determination that the petitioner in 1925 realized income from an installment sale of real estate made in 1923, sustained.

J. L. Elliot, C.P.A., for the petitioner.

Bruce A. Low, Esq., for the respondent.

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MARQUETTE

">*428 This proceeding is for the redetermination of a deficiency in income tax asserted by the respondent for the year 1925 in the amount of $896.11. Only so much of the deficiency is in controversy as arises from the inclusion in the petitioner's income of the amount of $9,125.72 which the respondent determined was realized by the petitioner in 1925 from a certain real estate transaction entered into in 1923.

FINDINGS OF FACT.

The petitioner is an individual residing at Charlotte, N.C.

In the year 1923 the petitioner and one F. O. Hawley purchased from the Charlotte Realty Co. a parcel of land containing 97 feet, located in Charlotte, N.C. The purchase price was $650 per foot, a total of $63,050, and was paid as follows: $10,000 cash, which the petitioner and Hawley borrowed from a bank, the assumption of a mortgage of $17,283.56 already on the property and held by the Charlotte Realty Co., and two promissory">*2402 notes of $17,883.22, each, which the petitioner and Hawley executed and delivered to the Charlotte Realty Co.

In the year 1923 the petitioner and Hawley sold 2 feet of said real estate to the city of Charlotte for $750 per front foot, or $1,500, which was paid in cash. In the same year they sold 60 feet of said real estate to one L. M. Josephs for $59,250. Josephs paid to the petitioner and Hawley $4,250 in cash, assumed the payment of the original mortgage on the property, amounting at that time to $16,187.50, and gave to the petitioner and Hawley promissory notes of third parties as follows: a note for $10,000 signed by D. W. Byerly and Thomas F. Kerr; a note for $10,000 signed by S. Raymond Thompson and J. P. Monroe, and two notes of $2,500 each signed by the Charlotte Electric Repair Co. Josephs also gave to the petitioner and Hawley his promissory note for $13,812.50, the balance of the purchase price. Subsequently the petitioner and Hawley turned over to the Charlotte Realty Co. the notes of the third parties and that company released its mortgage on the 35 feet of said real estate that the petitioner and Hawley still held.

The petitioner filed income-tax returns for">*2403 the years 1923 and 1925. Upon audit of the return for 1923 the respondent determined that the sale by the petitioner and Hawley to the city of Charlotte was a completed transaction in 1923 and that the petitioner realized a profit of $100 therefrom which should be returned as income for 1923. He also determined that the sale to Josephs was on the installment plan and that the petitioner realized a gross profit of $999.28 and a net profit of $749.28 from that sale in 1923 which should be included in income for that year. The respondent made ">*429 other adjustments in the petitioner's income for 1923 and determined a deficiency in tax.

The petitioner filed a petition with this Board, Docket No. 33237, for a redetermination of said deficiency, but he did not complain of the adjustment made by the respondent with respect to the income from the sale to Josephs. At a conference by an between the petitioner, or his representative, and officials of the Bureau of Internal Revenue, a stipulation as to the petitioner's tax liability for 1923 was entered into and was filed with this Board, and on the basis thereof an order of redetermination was entered on July 6, 1928. In computing">*2404 said tax liability the said sale to Josephs was treated as a sale on the installment plan and the petitioner's profit therefrom in 1923 was computed on that basis as above set forth.

The respondent, upon audit of the petitioner's return for 1925, determined that the deferred payments on the sale to Josephs were made in 1925 and that the petitioner in that year realized the remainder of his share of the profit from the sale, amounting to $9,125.72, and he included that amount in the petitioner's income for 1925 and determined a deficiency in the amount of $896.11.

OPINION.

MARQUETTE: The petitioner's position with respect to this proceeding is difficult to determine. In his petition he states that in 1923 he purchased a one-half interest in certain real estate; that he sold a portion of said real estate in the same year; that the transaction was not a completed one from which income could be realized, and that his profit, if any, is in the portion of the real estate which is still unsold. In his brief the petitioner takes the position that the sale to Josephs having been heretofore determined as an installment sale and the profit for 1923 computed on that basis, it should">*2405 be considered as an installment sale for subsequent years, but he still contends that the remainder of his profit, if any, is in the 35 feet of said real estate that he and Hawley still own.

It appears that the petitioner and the respondent are in accord that the sale to Josephs was an installment sale and that the profit therefrom in 1923 has been computed on that basis, and we see no reason for disturbing that determination. However, the petitioner's position that the remaining profit, if any, from the sale to Josephs is tied up in the 35 feet of the real estate in question that he and Hawley still own, is untenable. The sale to the city of Charlotte and the sale to Josephs were separate transactions which gave rise to profit or loss, and they are in no way related to any transaction that may hereafter be had with reference to the 35 feet retained by the petitioner and Hawley. ; H. F. Bovard">*430 et al., . The facts here are that the petitioner and Hawley in 1923 sold for $59,250, 60 feet of land that cost them $39,000. The purchaser paid them $4,250 in cash, assumed a mortgage">*2406 in the amount of $16,187.50, gave them notes of third parties of the face value of $25,000, and his personal note for the balance. Subsequently the petitioner and Hawley turned in said notes to the Charlotte Realty Co., from which they had purchased the property, and the Charlotte Realty Co. released its mortgage, or mortgages, on the 35 feet of property to which the petitioner and Hawley still held title. The record does not show when these notes were turned over to the Charlotte Realty Co. The respondent has determined that the deferred part of the purchase price was realized by the petitioner and Hawley in 1925, and there is no evidence in the record to negative that determination. The record is indefinite and unsatisfactory, but as it stands we can only affirm the respondent.

Judgment will be entered for the respondent.