Hayutin v. Commissioner

• Decision Date: 12 June 1972
• Docket Number: 4765-67,4628-64,4784-67.,5415-65,5434-65,4770-67,5432-65,5433-65,4771-67,4761-67,5524-65,5428-65,4760-67,4759-67,4763-67,Docket No. 4623-64,4720-67
• Citation: 1972 TC Memo 127,31 TCM (CCH) 509
• Parties: Irving J. Hayutin and Sima B. Hayutin, et al. v. Commissioner.
• Court: U.S. Tax Court

31 TCM (CCH) 509

1972 TC Memo 127

T.C. Memo. 1972-127.

Irving J. Hayutin and Sima B. Hayutin, et al.¹ v. Commissioner.

Docket Nos. 4623-64, 4628-64, 5415-65, 5428-65, 5432-65, 5433-65, 5434-65, 5524-65, 4720-67, 4759-67, 4760-67, 4761-67, 4763-67, 4765-67, 4770-67, 4771-67, 4784-67.

United States Tax Court.

Filed June 12, 1972.

COPYRIGHT MATERIAL OMITTED

Stanley L. Drexler and Leslie H. Wald, 1107 Tower Bldg., Denver U.S. Nat'l Center, Denver, Colo., for the petitioners (except in Docket No. 4720-67). Martin P. Miller, 288 Clayton St., Denver, Colo., for the petitioner in Docket No. 4720-67. Arthur B. Bleecher, for the respondent.

Memorandum Findings of Fact and Opinion

HOYT, Judge:

The respondent determined deficiencies in the petitioners' income tax for the years and in the amounts shown in the schedule below:

                                                          Deficiencies   Total Per  Total Per
                Petitioner(s)          Dkt. No.   Year      Per Year     Docket No. Petitioner
                Irving J. Hayutin,     4623-64    1955    $13,356.84
                et ux.                            1956      3,303.67
                                                  1957      3,530.75     $20,191.26
                                                          __________
                                       5433-65    1958      4,503.76
                                                  1959      7,938.47
                                                  1960      3,806.86      16,249.09
                                                          __________
                                       4760-67    1961        560.11
                                                  1962      3,216.13       3,776.24  $ 40,216.59
                                                          __________     __________
                Arthur B. Hayutin,     4624-64    1955      3,931.84
                et ux.*                           1956      2,054.39
                                                  1957      2,802.60       8,788.83
                                                          __________
                (A.B. Hayutin only)    5434-65    1958      5,213.60
                (Sylvia C. Harrison)   5524-65*   1959      9,606.23
                                                  1960      4,917.21      19,737.04
                                                          __________
                (A.B. Hayutin only)    4759-67    1961      1,754.39
                                                  1962     16,531.19      18,285.58    46,811.45
                                                                         __________
                Eugene E. Shaw         4625-64    1955      3,462.64
                                                  1956        372.88
                                                  1957      1,824.06       5,659.58
                                                                         __________
                                       5428-65    1958      8,120.79
                                                  1959     10,071.64
                                                  1960     10,484.11      28,676.54
                                                                         __________
                                       4771-67    1961        835.38         835.38
                                                          __________
                Eugene E. Shaw,        4761-67    1962      2,027.40       2,027.40    37,198.90
                ex ux.                                    __________     __________
                Honeymoon Manor,       4626-64    1955      3,061.50
                Inc.                              1956      3,092.51
                                                  1957      3,044.70       9,198.71     9,198.71
                                                          __________     __________
                Northwest Water        4627-64    1955    $ 6,967.52
                Corp.                             1956      2,294.67     $ 9,262.19
                                                          __________
                                       5432-65    1958     14,037.66
                                                  1959     28,305.80
                                                  1960     10,969.94
                                                  1961      8,638.25      61,951.65
                                                          __________
                                       4770-67    1962     52,056.57      52,056.57  $123,270.41
                                                          __________     __________
                S & H Builders,        4628-64 2/28/54      9,359.57
                Inc.                           2/29/56     30,813.69
                                               2/28/57     27,941.74      68,115.00
                                                          __________
                                       5415-65 2/28/58     33,751.61
                                               2/28/59     32,275.92
                                               2/29/60     38,531.31
                                               2/28/61     44,013.17     148,572.01
                                       4784-67 2/28/62     25,377.97
                                               2/28/63     37,004.39      62,382.36   279,069.37
                                                           _________      _________
                

                Winston Construction   4763-67 7/31/60        609.74
                Company                        7/31/62      1,720.41
                                               7/31/63     10,330.06      12,660.21    12,660.21
                                                          __________     __________
                Princeton, Ltd.        4765-67 3/31/61     40,610.61
                                               3/31/62     17,236.26
                                               3/31/63     17,244.26      75,091.13    75,091.13
                                                          __________     __________
                Sylvia C. Harrison     4720-67    1961        315.00
                (formerly                         1962      6,510.34       6,825.34     6,825.34
                Sylvia C. Hayutin)**                      __________     __________   __________
                                                           GRAND TOTAL             $630,342.11
                                                                                     ===========
                * Docket No. 5524-65, the petition of Sylvia C. Harrison for the
                taxable years 1958, 1959, and 1960, is a separate petition
                based on a statutory notice of deficiency issued jointly to
                petitioner Arthur B. Hayutin and Sylvia C. Harrison, the
                former Mrs. Hayutin. Arthur B. Hayutin's separate petition
                for those same years is identified as Docket No. 5434-65
                ** In Dockets 4759-67 (Arthur B. Hayutin) and 4720-67 (Sylvia C
                Harrison, the former Mrs. Arthur B. Hayutin) the respondent has
                taken inconsistent positions on a financial agreement incident
                to petitioners' divorce, the question being whether transfers
                in 1962 constitute periodic payments or a property settlement
                

Various issues in these cases were conceded prior to trial and others were conceded on brief. The issues remaining for our decision are as follows:

1. Whether five transfers of land to S & H Builders, Inc., were contributions to capital or bona fide sales; whether S & H Builders, Inc., acquired the transferors' basis in the land or a stepped-up basis; whether S & H Builders, Inc., is entitled to interest deductions for amounts paid pursuant to the land contracts; whether amounts received by Arthur Hayutin, Irving Hayutin, and Eugene Shaw were dividends, as opposed to a return of capital and interest.

(Docket Nos. 4623-64, 4624-64, 4625-64, 4628-64, 5415-65, 5428-65, 5433-65, 5434-65, 5524-65, 4759-67, 4760-67, 4761-67, 4771-67, 4784-67).

2. Whether the income of several trusts is taxable to the grantors, Arthur and Irving Hayutin.

(Docket Nos. 4623-64, 4624-64, 5433-65, 5434-65, 5524-65, 4759-67, 4760-67).

3. Whether the amounts which Northwest Water Corporation received from contractors ostensibly for shares of stock in Northwest constituted ordinary income from the sale of water taps or whether these amounts were capital contributions.

(Docket Nos. 4627-64, 5428-65, 5432-65, 5433-65, 5434-65, 5524-65, 4770-67).

4. Whether S & H Builders, Inc., was merely an agent or a conduit in the disposition of Northwest Water Corporation's capital stock and whether it thereby sustained neither gain nor loss upon such disposition.

(Docket No. 5415-65).

5. Whether the gain from the sale by the partnership, S-H Investment Company, of the capital stock of Curve Tavern, Inc., was (a) entirely a long-term capital gain, or (b) partly a long-term capital gain and partly a short-term capital gain.

(Docket Nos. 4623-64, 4624-64, 4625-64).

6. Whether Irving Hayutin may take a casualty loss deduction in 1962 in connection with damages sustained to his residence in 1955.

(Docket Nos. 4623-64, 4760-67).

7. Whether the partnership, S-H Investment Company, is entitled to deduct in its fiscal year ending March 31, 1958, the amount of $27,012.22 as a business bad debt.

(Docket Nos. 5428-65, 5433-65, 5434-65, 5524-65).

8. Whether Winston Construction Company and Princeton, Ltd., must include collateral certificates in income at face value rather than at 50 percent of face value.

(Docket Nos. 4763-67, 4765-67).

9. Whether S & H Builders had additional income during the fiscal year ending February 29, 1956, in the amount of $13,700, which the company omitted from its Federal income tax return for that year.

(Docket No. 4628-64).

10. Whether certain amounts paid in 1962 by Arthur Hayutin to his ex-wife pursuant to a stipulation and agreement, dated May 7, 1962, were deductible by Arthur and includable in Sylvia's income.²

(Docket Nos. 4720-67, 4759-67).

Findings of Facts

General Facts

Petitioners Irving J. Hayutin ("Irving") and Sima B. Hayutin are husband and wife, and filed joint Federal income tax returns, Forms 1040, for the calendar years 1955 to 1962, inclusive. When their petitions were filed, they were residents of Colorado.

Petitioners Arthur B. Hayutin ("Arthur") and Sylvia C. Harrison ("Sylvia"), formerly Sylvia C. Hayutin, were husband and wife in the years 1955 to 1960, inclusive. For those calendar years they filed joint Federal income tax returns, Forms 1040. Arthur and Sylvia were divorced in 1961. For the calendar years 1961 and 1962, they filed individual Federal income tax returns, Forms 1040. When their petitions were filed, they were residents of Colorado.

Petitioners Eugene E. Shaw ("Shaw"), and Nelda B. Isbell (formerly Nelda B. Shaw) were husband and wife in 1962, subsequent to which time they were divorced. They filed a joint Federal income tax return, Form 1040, for 1962. Eugene E. Shaw filed individual Federal income tax returns, Forms 1040, for the calendar years 1955 to 1961...