Carpenter v. COMMISSIONER OF INTERNAL REVENUE
| Decision Date | 10 December 1932 |
| Docket Number | Docket No. 54463. |
| Parties | HELEN G. CARPENTER, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Board of Tax Appeals |
Thomas L. Marshall, Esq., for the petitioner.
John D. Kiley, Esq., for the respondent.
This is a proceeding for the redetermination of an asserted deficiency in income taxes for the year 1928 in the amount of $1,657.16.
It is alleged that the respondent erred (1) in increasing income by the amount of $12,127.11 by reason of treating as income the entire proceeds above original cost received in the taxable year from the sale of a residence, the title to which property was held in joint tenancy by the petitioner and her husband, who died a few months prior to the sale; and (2) in failing to deduct from the gross sales price a real estate commission amounting to $3,750.
FINDINGS OF FACT.
The petitioner is an individual, with residence at Chicago, Illinois.
In 1919 the petitioner and her husband, Benjamin Carpenter, purchased residential property located at 1545 Astor Street, Chicago, Illinois, at a cost of $70,000, of which amount the petitioner and her husband each contributed one-half. The property was conveyed to them "not as tenants in common, but as joint tenants." Thereafter, an amount of $7,136.07 was expended for improvements upon the property, which was paid equally by the petitioner and her husband.
Benjamin Carpenter died February 23, 1927, at which time the property had a value of $125,000.
In the estate tax return filed on behalf of the estate of Benjamin Carpenter, there was included an amount of $62,500, representing one-half of the value of this property, and the Federal estate tax was duly paid upon the basis of such return.
The property in question was sold by the petitioner in August, 1927, for $125,000. A brokerage commission of 3 per cent, amounting to $3,750, was paid by petitioner at the date of sale. The sale was an installment sale, the contract of sale providing for an initial payment of $30,000 and the payment of $31,666.66 on August 25, in each of the years 1928, 1929 and 1930. During the year 1928 the installment due in that year was paid, and there was also paid in that year the installment which was not due until 1929, making a total payment in 1928 of $63,333.33.
In her income tax return for the year 1928, the petitioner included as income from the sale of the property in question the amount of $12,123.94. In determining the profit which the petitioner derived upon this transaction for purposes of petitioner's 1928 income tax return, her accountant first determined the total gross profit upon the sale by deducting the total cost, amounting to $77,136.07, from the total sale price of $125,000, leaving $47,863.93. He determined that the petitioner's portion of this profit was one-half, or $23,931.97. He then calculated that the ratio of the total amount received in 1928, $63,333.33, to the total sale price was 50.66 per cent. Using this percentage, he then determined that the profit to be returned by the petitioner in 1928 amounted to $12,123.94. In calculating the profit derived upon the sale he did not take into account the commission of $3,750 paid to the real estate broker. The petitioner paid the amount of tax shown on the face of this return for 1928.
The respondent in determining the deficiency herein added to the net income, as returned by petitioner, an amount of $12,127.11 as additional profit from the sale of the real estate in question.
OPINION.McMAHON:
We are here called upon to determine the taxable income derived in the year 1928 by the petitioner upon the sale in 1927 of certain real property located in Chicago, Illinois, which she and her husband had acquired and owned as joint tenants. Petitioner's husband died about six months before the date of sale.
The sale was upon the installment basis and was so treated by the petitioner in her income tax return for the year 1928. No question is raised as to the propriety of this manner of returning the income. The sole issue relates to the proper basis to be used. For the year 1928 the petitioner returned and paid income tax upon an aliquot part of one-half of the difference between the total cost of the entire property and the selling price. This was upon the theory that she acquired one-half of the property at the date of the original transfer to her and her husband. It is her contention that the remaining half of the property was acquired by her upon the death of her husband; that the basis for the determination of gain or loss upon her sale of that portion is its value as of the date of the death of her husband; and that, since at that date it had a value equal to the price at which it was later sold, no gain was derived upon the sale. The respondent, on the other hand, contends that the proper basis to be used in the determination of gain or loss to the petitioner upon the sale of the entire property is the original cost of such property, namely, $77,136.07, and that the gain derived by petitioner is the difference between that figure and the selling price of the entire property, $125,000, less the broker's commission of $3,750 paid by petitioner. Neither petitioner nor respondent, in their calculations, deducted this commission, but respondent in his brief concedes that it should be deducted in computing the profit. This amount will be deducted upon the recomputation under Rule 50.
Under section 113 of the Revenue Act of 1928, set forth in part in the margin,1 the basis for the determination of gain or loss from the sale or other disposition of property acquired after February 28, 1913, shall be the cost of such property, with certain exceptions. This property was acquired by petitioner after February 28, 1913, and unless one of the exceptions is applicable the basis to be used is the cost of the property. The only exceptions which are possibly applicable are contained in subdivision (a) (5).
In applying the quoted portion of the statute, we are governed by certain well established rules of statutory construction to the effect that exceptions to the general provisions of a statute should be strictly construed; that the burden of proof is upon the one claiming the benefit of such exceptions to bring himself within them; that the general provision is broader than the exception and all doubts and implications should be resolved in favor of the rule rather than the exception; that a legislature is presumed to have stated all the exceptions to a general provision which it intended to state; and that other exceptions than those designated by statute can not be read into the statute. Bend v. Hoyt, 13 Pet. 263; United States v. Scharton, 285 U. S. 518; Kendall v. United States, 107 U. S. 123; Hopkins v. United States, 235 Fed. 95; Basham Co. v. Lucas, 21 Fed. (2d) 550; Eddington v. Northwestern Bell Telephone Co., 201 La. 67; 202 N. W. 374; Mobile Liners v. McConnell, 220 Ala. 562; 126 So. 626; Holmes v. Coalson, 154 S. W. 661 (Tex.); In re Cadwell's Estate, 26 Wyo. 412; 186 Pac. 499; and Rothschild v. Superior Court, 293 Pac. 106 (Cal.). In Bend v. Hoyt, supra, the Supreme Court stated that "an exception in a statute amounts to an affirmation of the application of its provisions to all other cases not excepted," and "is conclusive to show that none other was intended." In United States v. Scharton, supra, it was held that the clause of section 1110(a) of the Revenue Act of 1926 fixing the limitation period for offenses involving fraud at six years is an exception clause, and is to be narrowly construed.
It is also well settled that the title of a statute can not enlarge or confer powers, or control the words of the act unless they are doubtful or ambiguous, and that the ambiguity must be in the context and not in the title to render the latter of any avail. Cornell v. Coyne, 192 U. S. 418; Patterson v. The Eudora, 190 U. S. 169, and United States v. McCrory, 119 Fed. 861. The same rule applies to headings of subdivisions of statutes. Chesapeake & Ohio Ry. Co. v. Pew, 109 Va. 288; 64 S. E. 35; State v. Bridges, 19 Wash. 431; 53 Pac. 545; 36 Cyc. 1134, 1135. There is no ambiguity in the context of the portion of the statute which is here under consideration.
We are here called upon, in the light of those rules of statutory construction, to determine whether petitioner received one-half of the joint tenancy property "by intestacy," within the meaning of section 113 (a) (5) of the Revenue Act of 1928.
It is the contention of the petitioner that in the case of joint tenants in Illinois, the death of one tenant gives to the other tenant, as a matter of succession, the half interest of the deceased tenant, and the surviving tenant who theretofore had owned merely an undivided half interest then receives the other half for the first time. This raises the question as to whether she took a one-half interest in the property from her husband "by intestacy" and whether this proceeding comes within the provisions of subdivision (a) (5) of section 113 of the Revenue Act of 1928. No claim is made that petitioner received this interest in real estate by general or specific devise.
In regard to the incidents of joint tenancy we are bound by the rules of property established in Illinois, the state in which the real property in question is located. Tyler v. United States, 281 U. S. 497.
It is well settled by the courts of Illinois that a joint tenancy may be created having all the attributes of a common law joint tenancy. In Gaunt v. Stevens, 241 Ill. 542; 89 N. E. 812, the Supreme Court of Illinois stated in part:
A "joint tenancy" is where two or more persons have any subject of property, jointly, in which there is unity of interest, unity of title, unity of time, and unity of possession. 2 Blackstone's Com. 180, * * *.
* * * on January 31, 1827, the General Assembly passed an act "concerning conveyances of real property", section 5 of...
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