Alper v. C.I.R., 022762 FEDTAX, 67873

Docket Nº:67873-67902.
Opinion Judge:BRUCE, Judge:
Party Name:HENRY S. ALPER and AGNES V. ALPER, et al.,[1] Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
Attorney:Mason C. Kassel, Esq., and Ira T. Wender, Esq., for the petitioners. Robert J. Fetterman, Esq., for the respondent.
Case Date:February 27, 1962
Court:United States Tax Court
 
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21 T.C.M. (CCH) 185 (1962)

T.C. Memo. 1962-38

HENRY S. ALPER and AGNES V. ALPER, et al., [1] Petitioners,

v.

COMMISSIONER OF INTERNAL REVENUE, Respondent.

Nos. 67873-67902.

United States Tax Court.

February 27, 1962

Alper and other individuals formed a partnership in 1950 to engage in the business of building homes. In the period 1950 to 1955 they built over 900 homes in 14 subdivisions. They formed 27 corporations in which they were the directors and officers, and held all the stock in proportion to their partnership interests. Alper acquired land and developed it for building. Homes were built by contractors and allotted by the partners among the corporations. Sales were made by real estate agents. Title was transferred by Alper to the selected corporation and by it to the buyer. The partners controlled the income of each corporation so that it did not exceed $25,000 in any taxable year, except in rare cases.

Held, the respondent did not err in disallowing surtax exemptions and minimum excess profits credits claimed on the returns of 24 of the corporations.

Held further, the fair market value of certain real estate determined.

Held further, amount paid to withdrawing partner in 1955 was not constructively received by him in 1954.

Held further, certain petitioners did not omit from gross income amounts in excess of 25 percent of the gross income stated in their returns for 1951 or 1952.

Mason C. Kassel, Esq., and Ira T. Wender, Esq., for the petitioners.

Robert J. Fetterman, Esq., for the respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION.

BRUCE, Judge:

These proceedings involve the following deficiencies in income tax:

Year

(Calendar

Docket No. Petitioner or Fiscal) Deficiency

67873 Henry S. & Agnes V. Alper 1951 $ 40,724.20

1952 72,136.47

1953 67,826.14

1954 309,816.96

67874 Robert L. & Lenore S. Alper 1951 3,521.78

1952 6,765.48

1953 15,191.32

1954 40,527.12

67875 Phillip J. & Eleanor B. Alper 1951 3,593.80

1952 6,879.48

1953 15,490.52

1954 39,948.96

67876 Joshua J. & Eunice S. Stone 1951 3,998.42

1952 7,143.41

1953 15,115.53

1954 39,320.79

67877 Morrie & Rae R. Mendelson 1951 8,329.52

1952 15,206.78

1953 36,146.56

1954 7,187.17

67878 Barton Building Company 7/31/55 3,953.40

67879 Bedford Building Company 10/31/54 6,041.73

67880 Bostwick Building Company 7/31/55 4,426.82

67881 Dover Building Company 4/30/55 4,790.62

67882 Fremont Building Company 9/30/54 5,801.39

67883 Emerson Homes, Inc. 4/30/53 8,188.44

4/30/54 7,120.15

4/30/55 5,308.56

67884 Fairwood Building Company 6/30/53 6,702.31

6/30/54 6,814.51

6/30/55 4,796.75

67885 Gwen Building Company 7/31/54 6,127.25

7/31/55 5,385.62

67886 Jewel Homes, Inc. 7/31/53 8,105.05

7/31/54 6,665.63

7/31/55 4,819.64

67887 Jasper Building Company 1/31/55 5,500.00

67888 Ivory Homes, Inc. 7/31/53 8,147.54

7/31/54 6,724.48

7/31/55 4,887.14

67889 Marcy Building Company 3/31/54 5,264.52

3/31/55 5,436.41

67890 Melvin Building Company 7/31/54 5,637.38

7/31/55 5,372.60

67891 Mt. Vernon Homes, Inc. 4/30/53 8,194.99

4/30/54 7,475.19

4/30/55 5,370.07

67892 Newport Building Company 7/31/55 4,364.71

67893 Oporto Building Company 9/30/54 5,790.58

67894 Radford Building Company 1/31/55 5,373.14

67895 Richland Building Company 9/30/54 5,777.82

67896 Rickie Building Company 7/31/54 6,238.66

7/31/55 5,174.13

67897 Shari Building Company 1/31/53 7,427.53

1/31/54 7,791.38

1/31/55 5,379.24

67898 Sherbourne Building Company 12/31/52 7,028.02

12/31/53 8,229.00

12/31/54 5,359.07

67899 Sutton Building Company 4/30/55 4,406.75

67900 Terri Building Company 3/31/54 7,246.49

3/31/55 5,434.17

67901 Woodsfield Building Company 6/30/53 8,182.81

6/30/54 6,568.60

6/30/55 4,974.10

67902 Sunningdale Homes, Inc. 1/31/53 86,419.19

1/31/54 188,117.27

1/31/55 289,814.69

The respondent made certain alternative determinations which involve all the petitioners. Also, there are some issues which relate to particular cases. Certain issues were conceded. The issues remaining for decision are: 1. Did the respondent err in disallowing the surtax exemptions and in some cases the minimum excess profits credits claimed on the returns of each of 24 of the corporations, that is, all the corporate petitioners except Sunningdale Homes, Inc., or in the alternative, did the respondent err in allocating all the income of these 24 corporate petitioners to Sunningdale, or again in the alternative, to Mendota Building Company, a partnership. 2. As a further alternative, whether the respondent erred in disallowing under authority of section 1551, Internal Revenue Code of 1954, the surtax exemptions claimed by three of the corporate petitioners, Barton, Bostwick, and Newport, for fiscal years ending in 1955. 3. What was the value of an interest in certain lots acquired by some of the individual petitioners in January 1954. 4. In the case of Henry and Agnes Alper, what was the fair market value in January 1951 of a one-half interest in an option to buy certain land, and what is the correct allocation of the cost basis in certain lands acquired by Alper in 1953. 5. Whether gain reported by Morrie and Rae Mendelson in 1954 was properly reportable for that year, and whether Mendelson sustained a short-term capital loss on the sale of an interest in land. 6. Whether the notices of deficiency were timely with respect to the years 1951 and 1952 in the cases of Robert and Lenore Alper, Philip and Eleanor Alper, Joshua and Eunice Stone, and Morrie and Rae Mendelson. Some facts were stipulated. FINDINGS OF FACT. The stipulated facts are so found. Petitioners, Henry S. Alper and Agnes V. Alper are individuals, husband and wife, residing in Detroit, Michigan. Petitioners Robert L. Alper are individuals, husband and wife, residing in Detroit, Michigan. Their Federal income tax return for 1951 was filed on March 17, 1952, and the tax shown to be due thereon was paid on that date. Their return for 1952 was filed on March 17, 1953. These petitioners have not signed any agreement extending the period for the assessment of tax for the calendar years 1951 or 1952. Petitioners Philip J. Alper and Eleanor B. Alper are individuals, husband and wife, residing in Detroit, Michigan. Their Federal income tax return for 1951 was filed on or before March 18, 1952. Their return for 1952 was filed on March 16, 1953. These petitioners have not signed any agreement extending the period for the assessment of income tax for the calendar years 1951 or 1952. Petitioners Joshua J. Stone and Eunice S. Stone are individuals, husband and wife, residing in Huntington Woods, Michigan. Their Federal income tax return for 1951 was filed on March 18, 1952. Their return for 1952 was filed on March 18, 1953. These petitioners have not signed any agreement extending the period for the assessment of income tax for the calendar years 1951 or 1952. Petitioners Morrie Mendelson and Rae R. Mendelson are individuals, husband and wife, residing in Detroit, Michigan. Their Federal income tax return for 1951 was filed on March 19, 1952. Their return for 1952 was filed on March 17, 1953. These petitioners have not signed any agreement extending the period of assessment of income tax for the calendar years 1951 or 1952. The individual petitioners filed joint Federal income tax returns for each of the calendar years 1951 through 1954 on the cash basis with the collector or director of internal revenue at Detroit, Michigan. Robert and Philip are sons of Henry and Agnes Alper, and Mendelson is Henry Alper's son-in-law. Henry S. Alper, Morrie Mendelson, and Joshua J. Stone will be referred to by their last names. Robert L. Alper, Philip J. Alper and Agnes V. Alper will be referred to by their first names. Corporate Federal income tax returns were filed for each of the 25 corporate petitioners for the taxable years involved with the collector or director of internal revenue at Detroit, Michigan. Each of the corporate petitioners' books and records were kept and returns filed upon an accrual basis. These corporations will hereinafter be referred to by the first name appearing in the title. The corporations, Stout Home Builders, Inc., incorporated April 26, 1950, and Fargo Building Company, incorporated May 5, 1950, are involved in these proceedings but are not petitioners. These two corporations will likewise be referred to as Stout and Fargo, respectively. They were dissolved in 1954. Alper has been engaged in the building business for 20 years. From 1939 to 1949 he was in that business with his brother...

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