MacLennan v. Commissioner

1930 BTA LEXIS 2010 | B.T.A. | 1930

Lead Opinion

ARUNdell:

This proceeding was brought to redetermine a deficiency of $206.48 in income tax for 1923.

The petitioner, a resident of Portland, Oreg., in 1917 sold his ranch for $155,000, of which amount he received $10,000 at the time the sale was closed, $20,000 within 30 days thereafter, and notes, secured by a mortgage on the property, covering the balance. In 1923, under a foreclosure suit instituted by him, the petitioner reacquired the property for the bid price of $61,800, a sum equal to the unpaid principal amount of $50,000 under the mortgage, accrued interest amounting to $3,825, taxes, court costs and other charges incident to the sale.

The only issue raised by the petition concerns the action of the respondent in treating the sum of $3,825, representing accrued interest under the mortgage, as taxable income.

The record does not clearly disclose the manner in which settlement was made under the sale. It seems, however, that the petitioner paid into the custody of the court an amount sufficient to cover the principal amount of mortgage, attorney’s fees, taxes, and court costs, leaving his lien for accrued interest to apply against the purchase price.

Whether settlement was made in cash or by a partial application of credits due the buyer, the amount of accrued interest paid or applied as a credit is, under our decision in Manomet Cranberry Co., 1 B. T. A. 106, taxable income to the petitioner.

Decision will be entered for the respondent.