Estate of Freeland v. CIR, 21795
Decision Date | 06 May 1968 |
Docket Number | No. 21795,21795 |
Citation | 393 F.2d 573 |
Parties | ESTATE of Eugene L. FREELAND, Deceased, by Security First National Bank, a national banking association, Executor, and Vera Good Freeland, by L. N. Turrentine, Conservator, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. Margaret C. LOWTHIAN, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. |
Court | U.S. Court of Appeals — Ninth Circuit |
George T. Altman (argued), Beverly Hills, Cal., Adam Y. Bennion (argued), Los Angeles, Cal., James W. Archer, Thomas F. Greaves, Frank Kockritz, Gray, Cary, Ames & Frye, Charles E. Burch, Jr., John B. Gregory, San Diego, Cal., for appellant.
Mitchell Rogovin, Asst. Atty. Gen., Lee A. Jackson, David O. Walter, Marco S. Sonnenschein (argued), Lester Uretz, Washington, D. C., for appellee.
Before BARNES, JERTBERG and ELY, Circuit Judges.
On December 30, 1966, the Tax Court of the United States held in two related decisions that deficiencies existed in the federal income tax of Eugene L. Freeland and Vera G. Freeland, husband and wife, for the years 1956-1961, and in that of Margaret C. Lowthian for the years 1956-1960. Eugene L. Freeland is now deceased, and his estate, along with Vera G. Freeland, now petitions this court under 26 U.S.C. § 7482 (1964), seeking review of the Tax Court's decision relating to them. Margaret C. Lowthian also petitions under the same statute for review of the decision in her case, and the two petitions have been consolidated for argument and decision.
In November 1956 the Freelands and Miss Lowthian (hereinafter referred to as "petitioners") sold their respective interests in a partnership, the Sam Berger Investment Company, the assets of which comprised approximately 4000 acres of land in San Diego, California. They reported the resulting gain on the installment basis as long-term capital gain, a tax treatment which was at first accepted by the District Director of Internal Revenue. In 1962, however, the District Director approved reopening with respect to 1956. (Subsequent years are here involved because of utilization of the installment basis). On July 29, 1964, the Commissioner of Internal Revenue issued statutory deficiency notices, asserting that the income from the sale of petitioners' partnership interests was ordinary income.1 This position was sustained by the Tax Court, and the correctness of that ruling represents the major issue now before us.
The general statutory rule governing sales of partnership interests is stated in section 741 of the Internal Revenue Code, 26 U.S.C. § 741 (1964):
The exception referred to, which is the basis for the Tax Court's decision, reads as follows:
Thus the basic issue here is whether the land owned by the petitioners' partnership was "held * * * primarily for sale to customers in the ordinary course of its trade or business." The Tax Court found that it was, and it is this finding which petitioners dispute.
The question thus posed is established by prior decisions as one of fact. E. g., Richards v. Commissioner of Internal Revenue, 81 F.2d 369, 370, 106 A.L.R. 249 (9th Cir. 1936). Its determination depends upon a fairly complex series of events — a context fully set out in the Tax Court's findings of fact. There is no real challenge to those findings insofar as they relate to this background, and we therefore adopt them as our statement of facts:
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