14 B.T.A. 10 | B.T.A. | 1928
Lead Opinion
There is no controversy between the parties to this proceeding as to the correctness of the method employed by the respondent in computing the profit realized by the petitioner in 1920 from the sales set forth in the findings of fact in which the entire purchase price, or less than 25 per cent, was paid in that year. The respondent now concedes that the sales in which exactly 25 per cent of the purchase price was paid in 1920 should be treated as sales on the installment basis, and the petitioner has abandoned its assignment of error relative to the cost of certain improvements made by it subsequent to 1920 pursuant to promises made by it to purchasers of lots. This leaves for our consideration only the question of whether the respondent has properly computed the income realized by the petitioner in 1920 from the sales where more than 25 per cent of the purchase price was paid in that year.
The respondent takes the position that the sales in question were completed transactions in 1920, and that the deferred-payment notes were the equivalent of cash and were income to the petitioner in that year. The petitioner contends that the notes had no fair market or readily realizable value in 1920, and that no part of the notes constituted income.
Upon the record we must sustain the contention of the petitioner. The evidence is clear that the petitioner was in need of large amounts of money in 1920 to com píete its development project and to liquidate obligations already incurred, and that it made diligent effort to discount or borrow money on the notes in question, but was unable so to do, and it appears that the banks and other financial institutions at Miami considered the notes of no present value. This lack of confidence in the notes on the part of the bankers and other lenders of money was due to some extent at least to their belief that the notes were bound up with the contracts of sale, and that the contracts might be terminated and canceled in the event of a breach
Judgment will be entered wnder Rule 50.