Coffey v. United States
Decision Date | 19 August 1964 |
Docket Number | No. 7422.,7422. |
Parties | Victor Lee COFFEY, Sr., and Margaret H. Coffey, Appellants, v. UNITED STATES of America, Appellee. |
Court | U.S. Court of Appeals — Tenth Circuit |
Gene W. Reardon, Denver, Colo. (Julie M. Reardon, Denver, Colo., on the brief), for appellants.
Benjamin M. Parker, Attorney, Dept. of Justice, Washington, D. C. (Louis F. Oberdorfer, Asst. Atty. Gen., Lee A. Jackson, David O. Walter, Attorneys, Dept. of Justice, Washington, D. C., and Lawrence M. Henry, U. S. Atty., Denver, Colo., on the brief), for appellee.
Before MURRAH, Chief Judge, and PICKETT and LEWIS, Circuit Judges.
The principal question presented by this appeal is whether gains accruing to the appellants-taxpayers from sales of real estate and water stock during the years 1952 through 1955 should be taxed as ordinary income or as income from the sale of capital assets.1 In their returns for these years, the taxpayers returned the gain as income from the sale of capital assets. The Commissioner determined that the property was held for sale to customers in the ordinary course of trade or business, and should be taxed as ordinary income. Accordingly, a deficiency was assessed, which was paid and a claim for refund filed. The refund was denied and this action was brought and tried before a jury. The trial court submitted to the jury the question of whether the properties from which the taxpayers derived the income in question through sales, were held "primarily for sale to customers in the ordinary course of business." The jury answered the question in the affirmative, and judgment in favor of the United States was entered thereon. The taxpayers contend that there is no evidentiary basis for the verdict, and that their motion for a directed verdict, made at the close of all the evidence, should have been sustained.
The law applicable to cases of this kind is well established and is as expressed in Friend v. Commissioner, 10 Cir., 198 F.2d 285, 287, 46 A.L.R.2d 761, where this court said:
See also Victory Housing No. 2 v. C.I.R., 10 Cir., 205 F.2d 371; Di Lisio v. Vidal, 10 Cir., 233 F.2d 909; Real Estate Corp. v. C.I.R., 10 Cir., 301 F.2d 423, cert. denied 371 U.S. 822, 83 S.Ct. 37, 9 L.Ed. 2d 61, reh. denied 371 U.S. 917, 83 S. Ct. 252, 9 L.Ed.2d 176.
In Real Estate Corp. v. C.I.R., supra, 301 F.2d at 427, it was said:
* * *"
Commissioner v. P. G. Lake, Inc., 356 U.S. 260, 78 S.Ct. 691, 2 L.Ed.2d 743, rehearing denied 356 U.S. 964, 78 S.Ct. 991, 2 L.Ed.2d 1071, is to the same effect.
The record discloses these facts: For many years the taxpayers had been in the restaurant business. In 1947 this business was sold, and Victor Coffee, who was then 53 years old, testified that after the sale, he and his wife "just retired" and that he was not thereafter engaged in any business. However, during the period 1947 through 1955, he and Mrs. Coffee were participating in a variety of real estate transactions2 in the Denver, Colorado area. In December of 1950, the taxpayers joined with Thomas Nevin, (a Denver lawyer and brother of the taxpayer Margaret Coffee), and others, in the purchase of 140 acres of land and water stock from the Colorado National Bank. At about the same time the taxpayers, with Nevin and Frederick Kal, a practicing lawyer associated with Nevin, purchased two other tracts, one of 80 acres and the other of 68.88 acres, together with water stock. All of these properties were unimproved and were acquired for the purpose of immediate sale to Artcraft Builders of New Mexico. After default by Artcraft, the taxpayers and Nevin, in 1952, again became the record owners of 100 acres of the Colorado National Bank land, of which the taxpayers owned an undivided two-thirds interest. Artcraft also defaulted as to the 68.88 acre tract and 40 acres of the 80 acre tract, and the taxpayers, Nevin and Kal again became the owners of this land and the water stock. Except for some platting by Artcraft, the character of these tracts after default by Artcraft was essentially the same as when acquired by taxpayers and others. During the period when these properties were being acquired, Nevin Homes, Inc., a Colorado corporation, was created, with the taxpayers owning 50% of the stock and Nevin and Kal owning the remaining 50%. This corporation purchased 40 acres of land adjacent to the 80 acre tract and constructed homes thereon for sale. As treasurer, Victor Coffee was paid an annual salary of $5,000.00.
The original purchase agreement of the 80 acre tract recited that the purchase was for the purpose of building two and three bedroom houses thereon to be sold to the public or to veterans, and it was agreed that Artcraft was to be bound by this provision. During this time there was considerable development in the area adjoining this property.3 In July of 1952 the taxpayers and Nevin signed the final plan of subdivision of Mar-Lee Manor No. 2, which was approved by officials of the City and County of Denver. This subdivision included land acquired from the Colorado National Bank. Shortly thereafter the taxpayers joined in a conveyance which, by lot and block numbers, transferred a portion of this subdivision to a life insurance company pursuant to a contract entered into about June of 1952. In 1953 additional lots in Mar-Lee Manor No. 2 were sold to a Mr. Bennett and a Mr. English. In 1953 the Nevin Construction Company, a Colorado corporation, owned entirely by Nevin and Kal, contracted to purchase from taxpayers and Nevin property in Mar-Lee Manor No. 2, and to purchase from taxpayers, Nevin and Kal property in the other two tracts, all of which totaled 79.29 acres. Nevin testified that this land, the purchase price of which was in excess of $200,000.00, was to be paid for "as Nevin Construction Company developed and sold the property." In 1952 the water stock acquired with the Colorado National Bank purchase was sold at a profit to Adolph Coors Brewing Company. In November, 1952, the taxpayers and Nevin sold 53 acres of the land returned from the...
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