DocketNumber： Docket No. 5267-68.
Citation Numbers： 29 T.C.M. 1062, 1970 Tax Ct. Memo LEXIS 118, 1970 T.C. Memo. 242
Filed Date： 8/26/1970
Status： Non-Precedential
Modified Date： 11/21/2020
Memorandum Opinion
TANNENWALD, Judge: Respondent determined a deficiency of $4,040.78 in petitioner's income tax for the taxable year 1966. Because of certain concessions by the petitioner, the only issue before us concerns the 1063 Commissioner's disallowance of all but $100 of a loss claimed by petitioner with respect to the foreclosure of certain real estate.
This is a fully stipulated case. The stipulations of facts and the exhibits thereto are incorporated herein by reference.
Petitioner was a legal resident of San Antonio, Texas, at the time the petition herein was filed. His cash basis return for the taxable year 1966 was timely filed with the district director of internal revenue, Austin, Texas.
On September 25, 1965, petitioner loaned $100 to Marie C. Chambers (hereinafter Chambers). As collateral for the loan, Chambers executed a deed to petitioner. The deed recited consideration of $10 "and other good and valuable consideration already paid and the assumption of any encumbrances thereon." At the time, the Veterans Administration held a mortgage on the premises actually owned by Chambers.
The terms of the loan from petitioner*120 to Chambers were that if the loan was not repaid by November 1, 1965, petitioner would have the right to record the deed. The loan was not repaid, and petitioner recorded the deed on November 3, 1965.
The deed given by Chambers to petitioner was defective in that it incorrectly described the real estate owned by Chambers. Chambers owned "Lot Eleven (11)" of a certain tract, but the deed given to petitioner recited "Lot 1" of the same tract.
On or about February 1, 1966, the unpaid balance on the mortgage on the real estate owned by Chambers was $8,207.68. On February 1, 1966, the trustee of the mortgage, pursuant to a power of sale contained in the mortgage, held a public sale of the real estate. The Veterans Administration bid the property in for $8,000. The sales proceeds were applied in partial payment of the outstanding unpaid balance of the mortgage.
The focal point for decision is the amount of petitioner's loss. Petitioner claims that he is entitled to deduct at least the sum of $8,307.68, representing his cash outlay plus the unpaid balance of the mortgage at the time of the foreclosure. Alternatively, in his reply brief, petitioner claims that he lost his equity in the*121 property by virtue of the foreclosure and that he is entitled to deduct the value of that equity. Respondent has raised no question as to the propriety of petitioner's deduction of an ordinary loss under section 165 but asserts that the amount of the loss should be limited to petitioner's actual cash outlay, to wit, $100.
The unusual aspect of this case stems from the fact that the deed from Chambers to petitioner was defective in that it incorrectly described the premises. Thus, if the deed were held to be controlling, petitioner never received title to the foreclosed property and never became responsible in any way for the mortgage. Petitioner argues, however, that, under Texas law, he assumed*123 a direct liability to Chambers for $8,207.68, the amount of the mortgage indebtedness,
With respect to petitioner's alternative argument, it is difficult to determine whether petitioner is claiming that the value of his equity is equal to the full market value of the property (which petitioner asserts was in excess of the $9,050 deducted on his 1966 return)
The substance of this case is that petitioner had no measurable loss beyond the amount allowed by respondent. That is the limit of his deduction.
Decision will be entered for the respondent. 1065
1. All references are to the Internal Revenue Code of 1954, as amended. Petitioner's 1966 return described the property as "business property" and respondent has raised no issue in this regard, in all probability because petitioner claimed no capital losses, with the result that even if the loss were considered a capital loss, petitioner would have been entitled to deduct the $100 against ordinary income. Secs. 165(f) and 1211(b).↩
2. Respondent, presumably because of the peculiar facts herein, does not contend that petitioner had a right of redemption which would cause the time of loss to be postponed until the year that right expired. See 5 Mertens, Law of Federal Income Taxation, sec. 30.85.↩
3. We were furnished with no specific evidence as to the unpaid balance of the mortgage indebtedness on the date the deed was recorded but it can be inferred that it was the same as the amount unpaid at the time of foreclosure.↩
4. The record contains no indication as to how the figure of $9,050 was determined.↩
H. G. And Frances Kellam Hendricks v. Commissioner of ... , 406 F.2d 269 ( 1969 )
Parker v. Delaney , 186 F.2d 455 ( 1950 )
Helvering v. Hammel , 61 S. Ct. 368 ( 1941 )
Woodsam Associates, Inc. v. Commissioner of Internal Revenue , 198 F.2d 357 ( 1952 )
Albany Car Wheel Company, Inc. v. Commissioner of Internal ... , 333 F.2d 653 ( 1964 )
Johnson v. Commissioner of Internal Revenue , 162 F.2d 844 ( 1947 )
Mary O'Hara Alsop v. Commissioner of Internal Revenue , 290 F.2d 726 ( 1961 )