United States v. Burket, 25897.

• Decision Date: 24 October 1968
• Docket Number: No. 25897.,25897.
• Citation: 402 F.2d 426
• Parties: UNITED STATES of America, Appellant, v. Maude M. BURKET, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

402 F.2d 426 (1968)

UNITED STATES of America, Appellant, v. Maude M. BURKET, Appellee.

No. 25897.

United States Court of Appeals Fifth Circuit.

October 24, 1968.

Mitchell Rogovin, Asst. Atty. Gen., Lee A. Jackson, Robert N. Anderson, David English Carmack, William A. Friedlander, Harris Weinstein, Attys., Dept. of Justice, Washington, D. C., William A. Meadows, Jr., U. S. Atty., Miami, Fla., for appellant. Robert L. Steuer, Asst. U. S. Atty., of counsel.

E. D. Treadwell, Jr., of Treadwell & Treadwell, Arcadia, Fla., George W. Ericksen, of MacFarlane, Ferguson, Allison & Kelly, Tampa, Fla., for appellee.

Before TUTTLE, COLEMAN and MORGAN, Circuit Judges.

LEWIS R. MORGAN, Circuit Judge:

This appeal involves federal income taxes for the taxable year 1965 in the amount of $17,792.98. The taxpayer, Mrs. Maude M. Burket, instituted this refund action in the District Court on the premises that income which she received from sales of certain property was entitled to capital gains treatment. At the time of the filing of the action, the taxpayer filed a demand for the factual issues to be determined by a jury. The Government filed an answer denying that the taxpayer was entitled to a refund. The Government then proceeded to take Mrs. Burket's testimony by deposition.

After the taking of the deposition, the taxpayer then moved for summary judgment based upon Mrs. Burket's deposition and affidavits on the ground that there was no genuine issue as to any material fact to be resolved, and that, as a matter of law, the gain realized from the sales of the property was taxable at capital gain rates. The Government opposed the taxpayer's motion, asserting that there was a genuine issue of material fact to be resolved, that the issue of the taxpayer's credibility should be tried by the jury. The Government further asserted that the taxpayer's affidavit should not have been taken into consideration on taxpayer's motion, since the affidavit contained conclusions of law on the ultimate issues in the case, and that said affidavit was inadmissible under Rule 56(e), Federal Rules of Civil Procedure. In further support of its opposition, the Government presented an affidavit of Roger M. Moore, in whose possession were the taxpayer's and her deceased husband's income tax returns for the years 1957 through 1965, and Schedule 1 to the protest file relating to the returns for the years 1957 through 1963, true copies of which were attached to the Government's affidavit. The District Court concluded that there were no issues of material fact to be resolved and granted the taxpayer's motion for summary judgment.

The ultimate issue in this case is whether the gain received by the taxpayer in 1965 from the sale of certain parcels of real property, sold by the taxpayer's deceased husband in 1950, 1951 and 1958 through 1965 and reported on the installment basis, constituted ordinary income, as contended by the Government, or long-term capital gain, as contended by the taxpayer and held by the District Court. The narrow issue on appeal is whether the District Court correctly granted the taxpayer's motion for summary judgment on the ultimate issue which is essentially a factual question.

The facts as found by the District Court may be briefly stated as follows:

The income in question was derived from fifty-six sales transactions in real estate occurring between 1950 and 1965. All parcels of land were held for an appreciable period of time, ranging from five to fourteen years, before sale by Mrs. Burket and her husband. These lands were acquired by the taxpayer and her husband as an incident to their practice of investing in tax certificates. The funds for the purchase of tax certificates came from income derived from certain citrus groves and an express fruit shipping business owned by taxpayer and her husband.

A tax certificate represents a tax lien that exists in favor of the appropriate governmental unit. The purchase of a tax certificate confers the right to receive principal and the bidded rate of interest, within a legally defined limitation, from the owner of the encumbered land. It confers a possibility of title upon the holder thereof. Upon failure of the owner to redeem the tax certificate, the holder thereof can, if he is so disposed, make application, after notice, for a tax deed. If the land owner does not redeem the certificate, a tax deed is then issued by the governmental authority. The acquisition of the tax deed confers title to the land.

The taxpayer and her husband¹ purchased tax certificates in order to realize the high rate of interest which they returned. As is the general practice, they did not inspect the land prior to bidding for a tax certificate.

Most of the tax certificates which were purchased by the taxpayer and her husband were redeemed. Only those unredeemed tax certificates which encumbered worthwhile land would be reduced to a tax deed. The criterion for selection was the value of the land and the liens, if any, that encumbered the land. Tax deeds were acquired only on lands which were encumbered by tax certificates held by taxpayer and her husband.

The lands that were acquired by tax deed were unimproved and they remained raw land until sold. Neither the taxpayer nor her husband ever held a real estate license and neither of them ever actively solicited a prospective purchaser. Persons interested in any of their lands would take the initiative in effectuating a purchase. Further, neither taxpayer nor her husband devoted time and effort to the sale of their lands.

However, the District Court omitted from its Findings of Fact certain facts which this Court feels are essential to a decision in this case. Contrary to the District Court's holding to the effect that the facts herein demonstrate an investment position on the part of the taxpayer and her husband, there were other facts, as shown by the exhibits attached to the affidavit filed in support of the Government's opposition to appellant's motion for summary judgment, which show that the...