Tucker v. Commissioner ( 1928 )

E. G. TUCKER, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Tucker v. Commissioner

Docket No. 7863.

United States Board of Tax Appeals

13 B.T.A. 932; 1928 BTA LEXIS 3146;

October 11, 1928, Promulgated

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">*3146 Value of certain real property acquired by petitioner in 1920 in exchange for capital stock determined.

Clyde A. Morwood, C.P.A., for the petitioner.

J. E. Marshall, Esq., for the respondent.

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SIEFKIN

">*932 This is a proceeding for the redetermination for a deficiency in income and profits taxes for the calendar year 1921 in the amount of $3,530.67.

The error assigned is the inclusion by the respondent in the value of assets received by the petitioner in exchange for stock in 1920, a value of $13,000 for certain real estate, thereby calculating a gain of $28,550 upon the transaction.

FINDINGS OF FACT.

The petitioner is an individual with principal office in Springfield, Mo. In 1921, he owned $15,000 par value of the stock of the Tucker-Ferguson Warehouse & Transfer Co., which was three-fourths of the total stock of that corporation.

Pursuant to an agreement entered into on March 28, 1921, between the petitioner and his wife, on the one hand, and B. H. Stonebraker on the other, B. H. Stonebraker purchased from the petitioner and his wife 150 shares of stock in the Tucker-Ferguson Warehouse & Transfer Co. for $30,000, and, in addition, ">*3147 conveyed to the petitioner, subject to a mortgage of $12,000 which the petitioner assumed and agreed to pay, the real estate and buildings occupied by the Tucker-Ferguson Warehouse & Transfer Co. on Pine Street in the City of Springfield. There were also transferred to the petitioner two trucks, a small office building and a Frisco Railway Co. lease covering the ground on which this building is located. As a part of the ">*933 transaction the petitioner executed to the Springfield Warehouse Co. a lease on the warehouse property at the rate of $300 per month for a period of 18 months. When this contract came to an end the petitioner received a rental on the property of $250 per month for a year. Later the rental received was $150 per month.

The respondent, in computing the gain or loss sustained upon the sale of the stock, found and allowed the following values of property received in exchange therefor:

Cash or its equivalent	$30,000
Two trucks	500
Small wooden office building	50
Equity in certain real estate of a value of $25,000 less
$12,000 indebtedness	13,000

The building located on the property is an old, one-story building having no basement. ">*3148 It is constructed of wood, concrete, and sheet metal and has running water and electric lights but no heat. The street upon which the property faces is unpaved and in bad condition. The property is two blocks from a paved street. The building is about 40 by 150 feet in size, is partitioned off into rooms, had 18-inch walls, concrete floors, and has windows and doors ample for the conduct of an ice business. This property was strictly a warehouse property and could not be used for a garage or a store due to its location. The lot itself is 200 by 450 feet in size. It is connected with the railroad by a spur track.

This property was purchased in 1911 or 1912 for $9,000, and was carried on the books of the Tucker-Ferguson Warehouse & Transfer Co. at amounts which increased each year. In 1921, it was entered on the books at $30,000. Similar property belonging to the Springfield Wagon Co. and located across the street was carried at less than this amount. Numerous attempts to sell the property in question failed.

OPINION.

SIEFKIN: The sole question to be decided in this case relates to the value of certain real property which the petitioner received among other things">*3149 in 1921, in exchange for 150 shares of the capital stock of the Tucker-Ferguson Warehouse & Transfer Co.

The evidence in the case is not clear as to the status of the ownership of this property at the time of the transaction, but the petitioner having raised no objection to its inclusion by the respondent among the assets received in exchange for capital stock, we are concerned only with the value thereof as established by the evidence in this case.

This real property was carried upon the books of the corporation at a value of $30,000 and was subject to a mortgage of $12,000. The ">*934 property consists of a lot 200 by 450 feet in size and a warehouse building thereon about 40 by 150 feet in size. The building is an old, one-story building having no basement, and is of wood, concrete and sheet metal construction. It is located upon an unpaved street and the distance to a paved street is two blocks. It is unsuitable for any use except as a warehouse. It is connected with the railroad by a spur track.

As a part of the transaction the petitioner leased the property in question to the Springfield Warehouse Co. for a period of 18 months at $300 per month. When this">*3150 contract expired the petitioner received a rental on the property of $250 per month for one year. Later the rental received was $150 per month.

One of the petitioner's witnesses testified that the lot and building was worth about $17,500 in 1921. Another witness testified that at that time the building was worth from $6,500 to $7,000 and that the ground was worth $20 per front foot. The frontage of the lot was 450 feet. This witness stated that the whole property had a total value of about $15,000 in 1921. His valuation is an investment valuation entirely. The petitioner testified that he has offered the property for sale for a number of years but has never been able to sell it. Petitioner testified that he has been willing to sell it for $15,000.

From all of the evidence in the case, it is our opinion that the property in question had a value at the time acquired by the petitioner of $17,500. Since the property was encumbered by a mortgage of $12,000, which the petitioner assumed, the net value of the property to the petitioner was $5,500.

Judgment will be entered under Rule 50.