First Sav. & Trust Co. v. Commissioner

FIRST SAVINGS & TRUST CO., EXECUTOR AND TRUSTEE, ESTATE OF D. S. WELLS, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

First Sav. & Trust Co. v. Commissioner

Docket No. 38016.

United States Board of Tax Appeals 20 B.T.A. 272 ; 1930 BTA LEXIS 2162 ; July 21, 1930 , Promulgated *2162 The selling price of a parcel of land being $108,000, of which only $23,000 was paid in the taxable year, petitioner is entitled to return the profit realized on the sale on the installment basis.

Fred S. Abrahams, Esq., for the petitioner.

A. H. Murray, Esq., for the respondent.

ARUNDELL *273 The respondent has determined a deificiency in income tax for the year 1923 in the amount of $2,093.87. The issue is whether the profit realized on the sale of a tract of land should be taxed on the installment or completed sale basis.

FINDINGS OF FACT.

Petitioner, a corporation with its principal office at Tampa, Fla., is the executor and trustee of the estate of D. S. Wells, who died about 1919, leaving several pieces of real property including a parcel of land known as Well's Park.

In or about May, 1915, petitioner, after some negotiation, gave Lamar Rankin an option to purchase Well's Park for the sum of $108,000, with an initial payment of $23,000. Thereafter Rankin, in order to obtain funds with which to purchase the property, induced duced Thomas F. West to join him in the transaction. Subsequent thereto, at the suggestion of West, *2163 Rankin arranged with petitioner to have the sale recorded as one having been made for a consideration of $120,000, payable $35,000 down and a mortgage back for $85,000, with the understanding that $12,000 of the initial payment of $35,000 would be refunded to him. The sale was made in 1923 to West on the basis of the option given to Rankin and this understanding. West, who took title to the tract, made an initial payment of $35,000 and gave petitioner a mortgage for $85,000. Of the amount of the initial payment, petitioner paid $12,000 to Rankin, who retained $4,000 and paid the balance to West. This distribution of the amount refunded was made pursuant to an agreement entered into between Rankin and West before property was sold.

In his determination of the deficiency in controversy respondent held that the tract was sold for $120,000, with an initial payment of $35,000, and accordingly taxed the gain on the transaction on the basis of a completed sale.

OPINION.

ARUNDELL: The point in controversy is whether the sale was made at the price of $108,000 with an initial payment of $23,000, as contended by petitioner, or $120,000 with a down payment of $35,000, as determined *2164 by the respondent.

The evidence of record convinces us that the true consideration for the property was $108,000, the price named in the option given Rankin, and that the initial payment was $23,000. The record does not clearly disclose the reason Rankin and West had for wanting the *274 sale to be recorded on the books of petitioner as a sale for $120,000, with a down payment of $35,000. Whatever their object may have been the understanding did not alter the terms of the option pursuant to the terms of which the sale was made.

The petitioner having received less than 25 per cent of the sale price of the property in 1923, respondent erred in refusing to permit petitioner to return the profit realized on the sale on the installment basis. Sections 212(c) and 1208 of the Revenue Act of 1926.

Decision will be entered under Rule 50.