Daniel Bros. Co. v. Commissioner

1927 BTA LEXIS 3022 | B.T.A. | 1927

Lead Opinion

OPINION.

Maequette:

Several errors on the part of the respondent in determining the deficiencies involved herein are' alleged in the petition, but only two of them were pressed at the hearing, the others being-abandoned by the petitioner. The first issue is whether the petitioner realized any profit, and if so what amount, upon the sale in the fiscal year ended August 31, 1920, of the property at 129-131-133 West Peachtree Street, and 416 Peachtree Street. The parties are in accord as to the sale price of the property and its depreciated cost'as of the date of sale, but it is contended by the petitioner that the value of the property on March 1, 1913, was in excess of cost and should be used as a basis for determining gain or loss from the sale. The petitioner claims a March 1, 1913, value of from $163,650 to $169,200.

In support of its contention as to the March 1, 1913, value of the property under consideration the petitioner introduced a number of real estate operators and brokers, several of whom were members of the appraisal committee of the Atlanta Real Estate Board, and were familiar with the property and other property in the vicinity, and who had many years of experience in buying and selling and appraising real estate in Atlanta. Their testimony is at length, and we will not attempt to set it forth in detail here. It is, however, sufficient to satisfy us that after the petitioner had acquired the several parcels of real estate set forth in the findings of fact and had subdivided and improved them, the parcel in question had a fair market value of at least $160,000 on March 1, 1913, and we so hold. It is not necessary for us to determine the exact value on that date for the reason that since the sale price was in excess of cost but less than the March 1, 1913, value, the petitioner sustained neither a taxable gain nor a deductible loss under the Revenue Act of 1918. Goodrich v. Edwards, 255 U. S. 527; United States v. Flannery, 268 U. S. 98; McCaughn v. Ludington, 268 U. S. 106; Appeal of River and Rail Storage Co., 1 B. T. A. 1098.

The petitioner also contends that each of the monthly payments made to Mrs. Richardson on the purchase price of the property at 45 Peachtree Street, should be considered as including interest and that in computing its net income for the fiscal years ended August 31, 1920, and August 31, 1921, it should be allowed to. deduct as interest so paid the amounts of $4,567.34 and $17,590.94, respectively. The respondent has treated the entire amount of each monthly payment as a capital expenditure.

The same question here presented was considered by this Board in Appeal of Marsh & Marsh, Inc., 5 B. T. A. 902, and Appeal of Anderson & Co., 6 B. T. A. 713, in which it was held that where sales are made on the deferred payment plan, interest not being provided for in the contract of sale, no part of the deferred payment will be considered as interest. But the petitioner contends that the contract between it and Mrs. Richardson, providing that if the petitioner should, at the end of six years, exercise its option to pay the entire amount due under the contract, it would be allowed “ six (6%) per cent for the actual time represented by the prepayment of the then unpaid payments,” shows that the deferred payments were intended to include interest.

We can not, however, agree with this contention. We think that the decisions in the cases above cited are controlling here and we therefore hold that no part of the monthly payments included herein should be considered as interest. See also Appeal of Carl Lang, 3 B. T. A. 417.

Order of redetermination will be entered on 15 days’ notice, wader Rule 50.

Considered by Phillips, Milliken, and Van Fossan.