Liant Record, Inc. v. Comm'r of Internal Revenue, Docket Nos. 72955
| Decision Date | 28 April 1961 |
| Docket Number | Docket Nos. 72955,83431-83433. |
| Citation | 36 T.C. 224 |
| Parties | LIANT RECORD, INC., ET AL.,1 PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Harry J. Winick, Esq., for the petitioners.
Robert S. Bevan, Esq., for the respondent.
The petitioners owned an office building in New York City, title to which was taken by the City of New York under condemnation proceedings. The proceeds were used by the petitioners to buy three apartment buildings in New York City. Held, that the properties purchased did not constitute ‘property similar or related in service or use to the property so converted,‘ within the meaning of section 1033(a)(3)(A) of the Internal Revenue Code of 1954, and that the petitioners are therefore not entitled to nonrecognition of gain upon the disposition of the office building. Thomas McCaffrey, Jr., 31 T.C. 505,affd. 275 F.2d 27, followed. ATKINS, Judge:
The respondent determined deficiencies in income tax against the petitioners for the calendar year 1955, as follows:
+------------------------+
¦Docket No. ¦Amount ¦
+-------------+----------¦
¦72955 ¦$15,561.02¦
+-------------+----------¦
¦83431 ¦31,492.43 ¦
+-------------+----------¦
¦83432 ¦30,352.69 ¦
+-------------+----------¦
¦83433 ¦30,310.37 ¦
+------------------------+
The only issue presented is whether the petitioners reinvested the proceeds received by them from the condemnation of property in property similar or related in service or use to the property condemned within the the meaning of section 1033(a) of the Internal Revenue Code of 1954.
Some of the facts have been stipulated and such stipulated facts are incorporated herein by this reference.
The petitioner Liant Record, Inc., hereinafter referred to as Liant, is a corporation organized and existing under the laws of the State of New York with its principal office in Brooklyn, New York. It keeps its books and prepares its income tax returns on a calendar year basis and on an accrual method of accounting.
The petitioners, William I. Alpert and Paula G. Alpert, are husband and wife, and the petitioners, Abraham and Sarah Alpert, are husband and wife, all residing at Long Beach, New York. Paula and Sarah Alpert are petitioners solely because they filed joint returns with their husbands for the calendar year 1955. Jack L. Alpert is an individual who formerly resided in Brooklyn, New York. The returns of all the petitioners were filed with the district director of internal revenue at 210 Livingston Street, Brooklyn, New York. The returns of the individuals were on the cash method of accounting.
The petitioners, William, Abraham, and Jack Alpert are brothers. They are investors in income-producing real property. They, together with Liant and Norman Eisenstein, were stockholders of a corporation known as Reliant Realty Co., Inc. On April 23, 1953, Reliant Realty Co., Inc., was liquidated and its stockholders acquired the ownership of real property known as 1819 Broadway, in the Borough of Manhattan, City of New York. The undivided interest and ownership of each of the coowners in the 1819 Broadway property was as follows:
+----------------------------+
¦ ¦Percent ¦
+------------------+---------¦
¦William ¦16 2/3 ¦
+------------------+---------¦
¦Abraham ¦16 2/3 ¦
+------------------+---------¦
¦Jack ¦16 2/3 ¦
+------------------+---------¦
¦Liant ¦8.7 ¦
+------------------+---------¦
¦Norman Eisenstein ¦41.3 ¦
+----------------------------+
The adjusted bases of the coowners in such property on November 17, 1953, were as follows:
+------------------------+
¦William ¦$313,222.27 ¦
+----------+-------------¦
¦Abraham ¦313,222.27 ¦
+----------+-------------¦
¦Jack ¦313,222.28 ¦
+----------+-------------¦
¦Liant ¦163,502.03 ¦
+----------+-------------¦
¦ ¦1,103,168.85 ¦
+----------+-------------¦
¦Eisenstein¦776,164.79 ¦
+----------+-------------¦
¦Total ¦1,879,333.64 ¦
+------------------------+
On November 17, 1953, the City of New York instituted condemnation proceedings against the 1819 Broadway property and acquired title on the same date. William, Abraham, and Jack Alpert and Liant received the following amounts in full settlement for the condemned property during the years indicated:
+-------------------------------------------+
¦ ¦1954 ¦1955 ¦Total ¦
+-------+-----------+-----------+-----------¦
¦William¦$201,875.00¦$232,588.78¦$434,463.78¦
+-------+-----------+-----------+-----------¦
¦Abraham¦201,875.00 ¦232,588.78 ¦434,463.78 ¦
+-------+-----------+-----------+-----------¦
¦Jack ¦201,875.00 ¦232,588.77 ¦434,463.77 ¦
+-------+-----------+-----------+-----------¦
¦Liant ¦105,378.75 ¦121,411.38 ¦226,790.13 ¦
+-------------------------------------------+
On July 12, 1955, William, Abraham, and Jack Alpert and Liant acquired property located at 55 West 11th Street, New York City, at a total cost of $545,701.50, the ownership being divided as follows:
+------------------+
¦ ¦Percent ¦
+-------+----------¦
¦Liant ¦50 ¦
+-------+----------¦
¦William¦16 2/3 ¦
+-------+----------¦
¦Abraham¦16 2/3 ¦
+-------+----------¦
¦Jack ¦16 2/3 ¦
+------------------+
On November 1, 1956, William, Abraham, and Jack, in equal cotenancy, acquired property located at 400 East 50th Street, New York City, at a total cost of $312,500, and property located at 35 East 84th Street, New York City, at a total cost of.$748,000.
The aliquot shares of the properties acquired by the petitioners during 1955 and 1956 are summarized as follows:
+----------------------------------------------------------+
¦By Liant: ¦ ¦
+-----------------------------------------------+----------¦
¦1/2 of 55 West 11th Street (1/2 of $545,701.50)¦272,850.75¦
+-----------------------------------------------+----------¦
¦By William: ¦ ¦
+-----------------------------------------------+----------¦
¦1/6 of 55 West 11th Street (1/6 of $545,701.50)¦90,950.25 ¦
+-----------------------------------------------+----------¦
¦1/3 of 400 East 50th Street (1/3 of $312,500) ¦104,166.66¦
+-----------------------------------------------+----------¦
¦1/3 of 35 East 84th Street (1/3 of $748,000) ¦249,333.34¦
+-----------------------------------------------+----------¦
¦ ¦444,450.25¦
+-----------------------------------------------+----------¦
¦By Abraham: ¦ ¦
+-----------------------------------------------+----------¦
¦Identical with William ¦444,450.25¦
+-----------------------------------------------+----------¦
¦By Jack: ¦ ¦
+-----------------------------------------------+----------¦
¦Identical with William ¦444,450.25¦
+----------------------------------------------------------+
The real property at 1819 Broadway consisted of a plot of land, 80 feet by 100 feet, on which was located a 25-story steel-frame building which had been erected about 1913, with a basement and subbasement. On November 17, 1953, it was rented to 82 tenants who used it to conduct business exclusively. The ground floor was occupied by a bank. The upper floors were occupied by various commercial tenants, including accountants, attorneys, real estate firms, and a doctor and a dentist. None of the petitioners used or occupied any part of this property.
The premises located at 55 West 11th Street consisted of a plot of land, 96 feet by 103 feet, and a 9-story penthouse brick building containing 82 apartments and 4 rooms for maids. The building was principally an apartment house, and most of the apartments were leased by the petitioners to tenants for residential purposes. On July 12, 1955, 77 were used for residential purposes. (Five were used for commercial purposes, including two physicians' offices, one to an export and import business office, and one as an office for economic research.) Three of the maids' rooms were used as a real estate office. None of the petitioners ever used or occupied this building.
The premises located at 400 East 50th Street consisted of a plot of land, 60 feet by 90 feet, and a 6-story brick building containing 47 apartments. The building was principally an apartment house and all of the 47 apartments were leased unfurnished by William, Abraham, and Jack Alpert to tenants for residential purposes. In addition, on November 1, 1956, there was a restaurant, a stationery store, a tailor shop, and a supermarket. The petitioners did not use or occupy the premises.
The premises located at 35 East 84th Street consisted of a plot of land, 125 feet by 102 feet, and an 11-story steel-frame building and penthouse, containing 46 apartments and 6 rooms for maids. Of the latter, only one was used as a maid's room in November 1956. This building was principally an apartment house, and most of the apartments were leased unfurnished by William, Abraham, and Jack Alpert to tenants for residential purposes. On November 1, 1956, 40 of the apartments were rented for residential purposes and 6 for commercial purposes, being used as offices by physicians and dentists. There was a valet shop in the basement. This property is in a predominantly residential neighborhood, but was zoned, and could be used, for commercial purposes. None of the petitioners used or occupied these premises.
All the apartments contained in the premises at 55 West 11th Street, 400 East 50th Street, and 35 East 84th Street were typical residential apartments having fully equipped bathrooms and kitchens.
None of the petitioners included in his or its income tax return for the year 1955 any part of the gain derived upon the disposition of the property at...
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