Williams v. Commissioner, Docket No. 1652.

Docket No. 1652. | B.T.A. | May 5, 1925

Lead Opinion

OPINION,

Trussell:

This appeal involves the right of the taxpayer to claim as a deduction from gross income the amount of a loss upon a sale of property acquired under the terms of the last will and testament of her deceased husband, and is governed by the provisions of the Revenue Act of 1921; sections 202 (a) (3) and 214 (a) (5).

The record of this appeal establishes the fact that Ellen C. Bonaparte acquired the property known as 601-603 Park Avenue, Baltimore, on June 28, 1921, by devise from her late husband; that the said property was duly appraised in pursuance to the laws of the State of Maryland and the estate-tax laws of the United States as having a value of $60,000, and that such appraisal was accepted by the Commissioner for the purpose of determining the amount of estate taxes due upon the transfer of the estate of Charles J. Bonaparte. These facts are not controverted in this appeal and no question has been raised as to the propriety or the validity of the appraisal. It is thus established that the fair market value of this property on June 28, 1921, was, so far as this appeal is concerned, the amount of $60,000. This property remained in the possession of Ellen C. Bonaparte until February 6, 1923, and the net proceeds received from its sale were $41,303.75, thus establishing the loss on the basis of its appraised value on the date of acquisition of $18,-696.25. The Commissioner has disallowed this loss for the alleged reason that “such loss did not arise from a transaction entered into fo: ifit.”

Under the provisions of the will, Ellen C. Bonaparte received the property known as 601-603 Park Avenue, together with 49 other separate tracts or parcels of improved real estate in or near the City of Baltimore. She received this property, and all of it, absolutely and without any qualifications or restrictions. She received it free from all the uses to which each or any tract had been theretofore devoted, and equally free from any or all, if such existed, of the family traditions which may have theretofore pertained to any particular piece of the property so received. She received it, as expressed in the will, for her exclusive use and benefit in order that she might, either through the use of the property or its disposition, provide for her comfort and well-being during the remainder of her life. In the will it was expressly stipulated that she was to “use, and if need be, exhaust, the corpus no less than the income of my property and estate.”

It is plain from the terms of the language of the will, and it is no doubt equally true as a matter of law irrespective of the terms of the will, that the taxpayer came into the possession and title to each and all of the properties received from her deceased husband with absolute freedom and at her own election to use, enjoy, or dispose of each and any of such properties in such manner as she might from time to time elect. In her use and disposition of such properties she was under no obligation to be guided in any manner by any of the former uses or traditions which may have previously attached to any particular parcel of property so received by her. Upon coming into possession of' such property and all of it, it devolved upon her so to determine the uses of such properties and each of them as would contribute most to her comfort, her well-being, and in so doing she must as to each and every of such properties handle the same in such a manner as would result in the return to her of as large an amount of income and profits as could be procured.

In the exercise of her prerogatives of absolute ownership she, within a few weeks after receiving the property of her deceased husband, offered the property at 601-603 Park Avenue for sale and also for rent in the reasonable and businesslike expectation that it could thus be made to produce an income for her use and benefit. She placed this property in the hands of a real estate agent with instructions to sell at its appraised value, and also with instructions to rent the same if possible in order that it might be producing an income pending the time when it might be sold. The real-estate brokers advertised it both for rent and for sale at its appraised value. After approximately a year and a half, during which time no one had been willing to rent the property and there had been no offer to buy at the appraised value, the taxpayer, finding the property to be a dead load upon her hands, productive of nothing but continued losses in the shape of taxes and other carrying charges, and finding it was impossible to sell the same at the appraised value, and after consulting with experienced real-estate operators, consented to dispose of the property at less than its appraised value in order that she might be relieved of the continual losses due to the maintenance and upkeep of the property, and in the expectation of receiving income from such funds as could be procured from its sale at a reduced price. Therefore, in November, 1922, she entered into a contract to dispose of the property at the figure at which it was finally sold in February, 1923.

The record clearly shows that the taxpayer, from the time she received this property, planned to rent it, and planned to sell it, in order to produce gains if possible, and finally did dispose of it, receiving about $41,000 therefor. The record convinces us that the transaction described was in every respect a transaction entered into for profit and that it comes clearly within the meaning of provisions of law, and that the immediate loss arising out of this transaction is such a loss as the law contemplated should be deducted from gross income during the year in which it was sustained.

We are, therefore, of the opinion that the Commissioner erred in disallowing the loss as a deduction and that his asserted deficiency in tax must now be disallowed.