1926 BTA LEXIS 2027 | B.T.A. | 1926
Lead Opinion
Section 212(d) of the Eevenue Act of 1926 provides as follows:
Under regulations prescribed by the Commissioner with the approval of the Secretary, a person who regularly sells or otherwise disposes of personal property on the installment plan may return as income therefrom in any taxable*1264 year that proportion of the installment payments actually received in that year which the total profit realized or to he realized when the payment is completed, bears to the total contract price. In the case * * * of a sale or other disposition of real property, if * * * the initial payments do not exceed one-fourth of the purchase price, the income may, under regulations prescribed by the Commissioner with the approval of the Secretary, be returned on the basis and in the manner above prescribed in this subdivision. As used in this subdivision the term “ initial payments ” means the payments received in cash or property other than evidences of indebtedness of the purchaser during the taxable period in which the sale or other disposition is made.
Section 1208 of the same Act reads as follows:
The provisions of subdivision (d) of section 212 shall be retroactively applied in computing income under the provisions of the * * * Revenue Act of 1921 * * *.
Under date of August 27, 1926, the Commissioner issued bis regulations pursuant to the provision of the statute quoted above.
These sections of the Act and the regulations promulgated pursuant thereto are applicable to the facts in this case. The payment, other than evidences of indebtedness of the purchaser, received in the taxable period from the sale of real estate, was less than one-fourth of the purchase price; and the taxpayer is, therefore, permitted to return as income a proportionate part of the profits ascertained in the manner prescribed in section 212(d). In ascertaining the proportion of profit, the taxpayer has not followed exactly the method there prescribed, in that he has used the ratio which the total profit realized bears to the net sale price, whereas the statute specifies, instead of the net sale price, the “total contract price.” This results in a slightly larger proportion of profit than if the statutory method were used.
Having decided the taxpayer may return as income of the taxable year only the proportionate profit on the payment received in that year, the question of the right of the taxpayer and his wife now to file separate returns of community property becomes immaterial.
Order of redetermination will be entered on 15 days' notice, under Rule 50.
