DocketNumber: Docket No. 7479-70 SC.
Citation Numbers: 31 T.C.M. 485, 1972 Tax Ct. Memo LEXIS 135, 1972 T.C. Memo. 121
Filed Date: 5/25/1972
Status: Non-Precedential
Modified Date: 11/20/2020
Held, petitioners are not entitled to deduct maintenance expenses and depreciation on old residence offered for sale after petitioners moved into new residence. Held, further, petitioners are not entitled to deduct FICA taxes paid for employees who helped them build new residence.
Memorandum Findings of Fact and Opinion
DRENNEN, Judge: Respondent determined deficiencies in the income taxes of petitioners as follows:
Year | Deficiency |
1967 | $107.23 |
1968 | 271.16 |
The issues presented for our determination are: (1) Whether petitioners are entitled to deductions for maintenance expenses and depreciation on their former personal residence which they incurred subsequent to their abandonment of the house as a residence but before it could be sold, and (2) whether petitioners are entitled to deduct as current expenses amounts contributed as FICA taxes on wages paid employees who worked on the construction of their present residence.
Findings of Fact
Some of the facts have been stipulated and are found accordingly.
Petitioners, Raymond L. Opper and Myrna J. Opper, husband and wife, resided in *136 Englewood, Colo., at the time they filed the petition herein. They filed their joint Federal income tax returns for the taxable years 1967 and 1968 with internal revenue service director in Austin, Texas.
Raymond L. Opper (hereinafter referred to as petitioner) is an enginer employed by Martin Co.
In January of 1958 petitioners moved into a house they had purchased at 6651 South Bridger Court in Littleton, Colo. They occupied this home as their personal residence until 1967. Prior to their move from the South Bridger Court house in 1967, petitioners had purchased some property at 486 5489 South Kearney Street, in Englewood, Colo. With the help of a carpenter and two laborers petitioners built a new home for themselves on the South Kearney Street property during the first 9 months of 1967. In October of that year petitioners' new home was sufficiently completed for them to make it their residence. Therefore, they moved from their old home on South Bridger Court to the new South Kearney Street address. After this move, petitioners never occupied the Bridger Court house again as their personal residence.
Immediately upon settling in their new house petitioners put their old home up for *137 sale. They attempted to market the house by placing a "For Sale" sign in the front yard, and on several occasions by advertising the house for sale in local newspapers. Petitioner initially set the selling price for the house at $16,000 which he refused to change. He eventually sold the house for that amount in January 1969. In the sales transaction the buyer assumed petitioners' FHA mortgage loan with an outstanding balance of $10,033.09 and made cash payments equivalent to $5,966.91.
Throughout the period the Bridger Court property was offered for sale the house remained vacant. The property was never rented nor offered for rent. On one occasion petitioner rejected an unsolicited offer to rent it because he did not consider the offer a serious one.
At some time in the early months of 1968 petitioners rejected a cash offer of $13,500 for the Bridger Court property. On June 26, 1968, the Federal Housing Administration appraised the value of the house and land at $16,000. Subsequently, the following October and November, petitioner granted two different parties an option to purchase the property at a stated price of $16,000. However, neither of these options was ever exercised.
The *138 petitioners' cost basis in the Bridger Court property in October of 1967 was $17,089. When the house was sold in 1969, however, petitioners did not claim a loss on their 1969 Federal income tax return.
During the period the Bridger Court residence was for sale petitioners incurred maintenance expenses in the amounts of $48.29 and $506.54 in 1967 and 1968, respectively. Additionally, as employers of the carpenter and two laborers who worked on the Kearney Street house, the petitioners paid $301.10 as FICA tax on their wages in 1967. On their 1967 and 1968 Federal income tax returns petitioners claimed a maintenance expense deduction in the amounts of $48.29 and $506.54, respectively, and a depreciation deduction of $138 and $640, respectively. Petitioners also claimed a deduction on their 1967 income tax return for the $301.10 they had paid in FICA taxes. In the notice of deficiency issued to petitioners respondent determined that petitioners were not entitled to any of the claimed deductions mentioned above.
Opinion
The first issue involves the expenses petitioners incurred while holding their house for sale during 1967 and 1968. Petitioner believes they are entitled to depreciation *139 and maintenance expense deductions for the upkeep of the house while it was on the market. He claims the deductions under the auspices of sections 167(a)(2) 1 and 212(2), and he bases his position on
Though petitioner has done a commendable job of presenting his case at trial, apparently without the aid of an attorney, he has nevertheless failed to show sufficient evidence of facts which would prove his entitlement to the claimed deductions. The essential element absent in petitioner's case is proof that he intended to, or actually did, convert his former residence into income-producing *140 property prior to its sale.
The recent case of
If we answer these questions from the facts before us we find that petitioner and his wife actually occupied the South Bridger Court house almost continuously for the 9 years prior to vacating it and offering it for sale. Upon their removal from the house in October of 1967, it remained vacant until its sale in January of 1969, thus rendering the residence potentially available for petitioner's personal use, even though he and his wife were living in their new South Kearney Street home. Absent evidence to the contrary, we assume that the South Bridger Court house was essentially residential in nature. Petitioner made no attempt to rent the house and he rejected an unsolicited rental offer because the potential *142 tenant did not offer a firm rental price. Finally, the nature of petitioner's attempts to sell the house was basically to set a firm price, approximately equivalent to his cost basis in the property, and stick with it until the house sold.
There was some disagreement as to the fair market value of the home when petitioners vacated it in October of 1967. Two figures were offered at trial, $13,500 and $16,000. Using either figure and petitioner's basis in the property of $17,089, it is clear that the $16,000 purchase price which taxpayer demanded had no expectation of profit, in the tax sense, but instead sought only to mitigate his potential loss. See majority opinion in
We have stated that the key question, in cases of the type involved herein, is the purpose or intention of the taxpayer in light of all facts and circumstances. As in the Newcombe case, the facts in this case, as a whole, bring us to the conclusion that petitioner did not intend to, and did not in fact, convert his former residence into an income-producing investment prior to its sale. Consequently, we must uphold the respondent's determination on the first issue.
Likewise, in the second issue, we are compelled to hold for respondent. Petitioner has claimed a deduction for FICA taxes he paid on the wages of the workers who constructed his South Kearney Street home. However, he cites no authority in support of his position.
It is now well established that all tax deductions are a matter of legislative grace.
Section 164 provides for the deduction of certain taxes borne by taxpayers. However, it contains no mention of such a deduction allowance for FICA taxes. Moreover, 488
Decision will be entered for the respondent.
Marjorie M. P. May v. Commissioner of Internal Revenue , 299 F.2d 725 ( 1962 )
Howard v. Commissioner of Internal Revenue , 202 F.2d 28 ( 1953 )
New Colonial Ice Co. v. Helvering , 54 S. Ct. 788 ( 1934 )
William A. And Helen M. Lull v. Commissioner of Internal ... , 434 F.2d 615 ( 1970 )