Hazlett v. Commissioner , 23 B.T.A. 303 ( 1931 )

ELVIE N. HAZLETT, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Hazlett v. Commissioner

Docket No. 42215.

United States Board of Tax Appeals

23 B.T.A. 303; 1931 BTA LEXIS 1895;

May 18, 1931, Promulgated

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Where real estate is sold and 20 per cent of the gross consideration is paid in cash and the remainder is represented by notes payable over a period of years, only a pro rata portion of the commission, based on the ratio of the payments made in the year of sale to the gross consideration, may be deducted as selling expenses in the year of sale.

W. L. Schuyler, C.P.A., for the petitioner.

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

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STERNHAGEN

Respondent has determined a deficiency of $280.43 in income tax for 1925, which results from the disallowance of part of a commission paid on property sold on an installment basis. Petitioner contends that the entire commission is deductible in the year of sale.

FINDINGS OF FACT.

Petitioner is an individual residing at Miami, Fla. In October, 1920, she acquired, for $7,500, a lot and five-room bungalow worth between $4,000 and $4,500. She later erected on the lot a garage at a cost of $300.

In 1925 she sold the property for a gross consideration of $100,000, of which $20,000 was paid in cash and the remaining $80,000 was represented by five notes for $16,000 each, payable in periods of one year for five years thereafter and secured by a first mortgage on the property. From the initial payment of $20,000, petitioner paid $300 as interest and taxes accrued and $5,000 as a commission for the sale. On her income-tax return she deducted these amounts as expenses. The Commissioner disallowed the deduction of $4,000 of the commission.

OPINION.

STERNHAGEN: The petitioner contends that the full commission of $5,000 should be deducted in 1925, the year of sale, while respondent defends his action in allowing the deduction of only $1,000, or 20 per cent of the commission, on the ground that the first installment of the purchase price, paid in 1925, was only 20 per cent of the whole.

The question presented in this case is the same as that in , and in accordance therewith,

Judgment will be entered for the respondent.