American Land & Inv. Co. v. Com'r of Internal Revenue, 2892.

• Decision Date: 28 April 1930
• Docket Number: No. 2892.,2892.
• Citation: 40 F.2d 336
• Parties: AMERICAN LAND & INVESTMENT CO. v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Fourth Circuit

40 F.2d 336 (1930)

AMERICAN LAND & INVESTMENT CO. v. COMMISSIONER OF INTERNAL REVENUE.

No. 2892.

Circuit Court of Appeals, Fourth Circuit.

April 28, 1930.

Clement F. Haynsworth, of Greenville, S. C. (Haynsworth & Haynsworth, of Greenville, S. C., on the brief), for petitioner.

Andrew D. Sharpe, Sp. Asst. to Atty. Gen. (Sewall Key, Sp. Asst. to Atty. Gen., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and John McC. Hudson, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., on the brief) for respondent.

Before WADDILL and NORTHCOTT, Circuit Judges, and GLENN, District Judge.

GLENN, District Judge.

This is a petition to review the decision of the United States Board of Tax Appeals. The only previous opinion in the case is that of the Board reported in 14 B. T. A. 615. The matter was heard by the Board on an agreed stipulation of facts. This agreed stipulation of facts had been prepared by an accountant, and it fails to show the exact nature of a contract covering the sale of land out of which the income involved came. The transaction out of which the tax grew is recited as follows:

"That there is no contention as to any item of income or deduction in 1921 except the profit from sale of certain real estate.

"That on July 20th, 1920, Richard A. Hester entered into an agreement in writing with T. R. O'Dell for the sale of 379 acres of land, with buildings in Pickens County, South Carolina. That this agreement is duly recorded in Pickens County, South Carolina. That the total consideration for the land and buildings was to be One hundred thousand Dollars ($100,000.00).

"That under the terms of the agreement there was $10,000.00 paid to Richard A. Hester on July 20th, 1920, and $40,000.00 on January 1st, 1921. That the agreement provided for payment of $10,000 July 20th 1920, $40,000.00 January 1st, 1921, and the balance in five equal annual payments of $10,000.00 each, the unpaid balance of $50,000.00 January 1st, 1921, to be secured by a mortgage of the premises, deed having been made by Richard A. Hester to T. R. O'Dell January 1st, 1921, and recorded in Pickens County, South Carolina in accordance with the sales agreement."

The actual contract seems never to have been brought to the attention of the Board and the record before us refers to it variously. It is called in one place "an agreement," in another a contract "of sale," but in most places, we find that the phrase "contract for the sale" is used. It is unfortunate that the actual contract is not set out, so as to enable us to determine more accurately the one question involved in this appeal; namely, when did "the sale" take place, within the meaning of the word "sale" as used in the Revenue Acts and the Treasury Regulations adopted pursuant to the Revenue Act of 1926? The Commissioner had determined that "the sale" took place January 1, 1921, when the deed conveying the premises was delivered. The Board of Tax Appeals sustained the Commissioner and held that the evidence failed to show facts which would cause it to rule that the sale had taken place in 1920. The only question presented by this appeal is whether or not there is any error of law in the Board's decision.

The pertinent facts other than those outlined above can be recited in a few words. Hester, who made this contract for the sale of the plantation, died in 1924, and the American Land & Investment Company, a South Carolina corporation, is the duly qualified and acting executor of his estate. Hester, in his return for the calendar year 1921, returned the profits from the sale on an installment basis. The Commissioner thereupon determined a deficiency in the income taxes of Hester for the year 1921. The Commissioner's findings, sustained by the Board, are based entirely upon the single proposition that, as a matter of fact and of law, the sale took place on January 1, 1921, when the deed was delivered. If the Commissioner and Board were correct in this finding, then it follows with all the certainty of formal logic that their decision must be affirmed.

The pertinent provisions of the Revenue Act of 1926, c. 27, 44 Stat. 9, 23, 130, are sections 212 and 1208 (26 USCA §§ 953, 953a). Pertinent provisions of the Treasury Regulations 69 are found in article 44 thereof, which deals with the sale of real property involving deferred payments. Having decided that the sale took place in 1921, the year in which the $40,000 payment was received, the Commissioner and Board necessarily decided that this sale was within the terms of subsection 2 of article 44, and was a sale described as follows: "Deferred-payment sales not on the installment plan, that is, sales in which the payments received in cash or property other than evidences of indebtedness of the purchaser during the taxable year in which the sale is made exceed one-fourth of the purchase price."

The appellant's chief contention is that by reason of the South Carolina law governing contracts "for the sale of land," the Board should have held that "the sale" took place in July, 1920, and therefore the taxpayer had the option of treating the sale as being one on an installment basis, and that, by returning the income as he did, he was exercising this option. This would have put the sale within the terms of subsection one (1) of article 44 as being a sale described as follows: "Sales of property on the installment plan, that is, sales in which the payments received in cash or property other than evidences of indebtedness of the purchaser during the taxable year in which the sale is made...