Adams v. Burts
| Citation | 140 S.E.2d 586,245 S.C. 339 |
| Decision Date | 16 February 1965 |
| Docket Number | No. 18306,18306 |
| Parties | Stephen B. ADAMS, Respondent, v. Sam N. BURTS, James A. Calhoun, Jr., Otis W. Livingston, Harold F. Murph, and Robert C. Wasson, constituting the South Carolina Tax Commission, Appellants. |
| Court | United States State Supreme Court of South Carolina |
Daniel R. McLeod, Atty. Gen., James M. Windham, Asst. Atty. Gen., Columbia, for appellant.
Seigler & Seigler, Columbia, for respondent.
Stephen B. Adams, the respondent herein, brought this action against the members of the South Carolina Tax Commission, the appellants herein, under Section 65-2661 et seq., Code of 1962, to recover the sum of $1,575.34, being additional income taxes and interest paid under protest assessed by the appellants against the respondent for the income tax years 1960, 1961 and 1962, inclusive.
It appears from the record that the respondent acquired, on July 6, 1952, a tract of land located in Richland County, and in 1958 he sold the timber thereon for a total price of $63,017.00. The aforesaid purchase price was agreed to be paid on an installment basis and was actually paid in installments of $3,000.00 in 1958, $12,767.00 in 1959, and $15,750.00 in each of the years 1960, 1961 and 1962.
The respondent, who kept his records on a cash receipts and disbursements basis treated the aforesaid sale as an installment one in the computation of income taxes due to the State of South Carolina for the years 1958 through 1962. The South Carolina Tax Commission acquiesced in and approved election by the respondent of the installment method of reporting the profit on the sale of the aforesaid timber. For the years 1958 and 1959, the respondent reported and paid income taxes to the appellants upon all of the profit received in the installments for these years. However, for the years 1960-1962 inclusive, the respondent deducted from what he considered to be the income otherwise taxable, one half of the gains arising from the sale of said timber, relying upon an amendment to Section 65-258 of the 1952 Code, which said amendment was approved by an Act of the General Assembly of this State on April 21, 1960, 51 Stats. 1660, and is now codified as Section 65-258(6) of the 1962 Code, and provides for deductions from gross income of:
'One half of gains and losses arising from the sale or exchange of capital assets, as defined in this chapter, after allowance for expenses relating to such sale or exchange; and * * *.'
It was provided in the aforesaid amendment, Section 7 thereof, that:
'This Act shall, upon approval by the Governor, be effective with respect to income earned on and after January 1, 1960.'
The appellants disallowed the capital gains treatment used by the respondent with respect to his taxable income for the years 1960-1962 inclusive, thus resulting in the assessment of additional income taxes for each of said years, all of which is now the subject of this action.
It is the position of the appellants that, properly considered, the income of the respondent with which we are here concerned was 'earned' before January 1, 1960, and not 'earned on or after January 1, 1960', so as to come within the provisions of the statute above quoted. The respondent contends that the exclusion of one half of the gains reported in the years 1960, 1961 and 1962 was proper on the ground that the excluded income was 'income earned on or after January 1, 1960'. The real question for decision here is whether or not the income with which we are here concerned from the sale of timber was 'earned on or after January 1, 1960'.
The Master in Equity for Richland County, to whom this matter was referred, as well as the trial Judge, adopted the position taken by the respondent, that is, that the aforesaid income was earned on and after January 1, 1960, so as to enable the taxpayer, one reporting on the cash receipts and disbursements basis, to exclude from taxable income in each of the years 1960, 1961 and 1962, one half of the gains with respect to the installments received in each of these years.
The record before us reveals that there was a completed sale of the timber in 1958 between the respondent here and the purchaser thereof. The sales price had been fully agreed upon, all events had occurred at that time to fix the amount to be paid by the purchaser and to determine the liabilities of the parties. The sale was consummated then for tax purposes. Johnson v. South Carolina Tax Commission, 235 S.C. 155, 110 S.E.2d 173. The respondent here, for reasons of his own, chose to defer the receipt of a part of the purchase price of the timber to subsequent years.
Although not an issue here, it should be borne in mind that at the time of the sale of the timber by the respondent in 1958 there was no statutory authority for reporting income for tax purposes on an installment basis. It was not until 1961 that the General Assembly of this State amended Section 65-286 of the 1952 Code to permit the reporting of income on the installment basis and then only 'for taxable years beginning after December 31, 1960'. 52 Stats. 226. Heyward v. South Carolina Tax Commission, 240 S.C. 347, 126 S.E.2d 15. As is heretofore stated, and as was stipulated by the parties to this action, the appellants acquiesced in and approved the respondent's election of the installment method of reporting the profit on the sale of the aforesaid timber.
The question of whether the respondent should have been required to report his entire profit on the sale of the timber as income come in the year 1958 is not before us for decision. We will, for the purpose of this appeal, assume the right of the respondent to report his income on an installment basis, particularly in view of the acquiescence in and approval by the appellants of such method.
The respondent emphasizes the fact that he reports his income and pays his tax on a cash receipts and disbursements basis, thus contending that he had not actually received all of the income in 1958 but rather that in 1960, 1961 and 1962, after the effective date of what is now Section 65-258(6) of the 1962 Code, he actually received certain installments to which, under his contention he could apply the aforesaid statute.
It is not logical for us to conclude that it was the intention of the General Assembly, in the enactment of the aforesaid statute with reference to capital gains effective with respect to income earned on...
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