Lobello v. Dunlap, 14551.
| Decision Date | 12 February 1954 |
| Docket Number | No. 14551.,14551. |
| Citation | 210 F.2d 465 |
| Parties | LOBELLO et al. v. DUNLAP. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Sam G. Winstead, Dallas, Tex., for appellants.
H. Brian Holland, Asst. Atty. Gen., Ellis N. Slack, and Melva M. Graney, Sp. Asst. Attys. Gen., Dudley J. Godfrey, Jr., Sp. Asst. to Atty. Gen., Washington, D. C., Heard L. Floore, U. S. Atty., Ft. Worth, Tex., for appellee.
Before HUTCHESON, Chief Judge, and BORAH and RIVES, Circuit Judges.
The question presented is whether the district court erred in holding that gain realized by the taxpayers in 1946 from each of three sales of real estate is taxable as ordinary income rather than capital gain. The taxpayers contend that the properties sold were capital assets within the meaning of Section 117(a) (1) of the Internal Revenue Code, 26 U. S.C.A.,1 and, accordingly, the gains realized from their sales were entitled to long-term capital gain treatment, the properties having been held in excess of six months.
The properties were located in Dallas County, Texas. Two of the sales were from a tract of land known as the Lover's Lane Tract and the other sale was of a tract known as the Ventura Tract. The facts were substantially stipulated and are not in dispute, the evidence consisting of a stipulation and the testimony of two of the taxpayers, largely in elaboration of the stipulated facts. The question was narrowed as to whether each of the pieces of property was excluded from "capital assets" as defined in Section 117(a) (1), as being "property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business". At the conclusion of the testimony, the district court found against the taxpayers, rendering a brief oral opinion set forth in the margin.2
In the tax year under consideration, 1946, both Sam Lobello, Sr. and Sam Lobello, Jr. held real estate dealer's licenses. Sam Lobello, Sr. was a member of seven partnerships which invested in or dealt in real property, including the partnership of Lobello & Lobello through which the two sales from the Lover's Lane Tract were made and the partnership of Ventura & Lobello through which the Ventura Tract was sold. The other partner in Lobello & Lobello was Sam Lobello, Jr., and the two together with Ventura were the partners in Ventura & Lobello, each owning a one-third interest.
In 1944 Sam Lobello, Sr. acquired Lover's Lane Tract with a 540 foot frontage on Lover's Lane in the city of Dallas. In 1945 this property became an asset of Lobello & Lobello. During 1945 the partnership made three separate sales from this tract totaling 170 front feet; in 1946 the partnership made two more sales from the tract totaling 175 front feet; and in 1947 the partnership made one sale of 25 front feet. In 1948 the partnership completed improvements on the remaining 170 front feet, the improvements being retail stores which have been continuously rented by the partnership since that time.
It is undisputed that at the time the property was acquired and at the time it became an asset of the partnership it was the intention of taxpayers to improve the entire property with retail stores to be held as rental property. The partnership was unable to carry out its original plans due to the restrictions against building which existed after World War II. In 1946 the partnership engaged an architect at an expense of $900.00 to prepare plans for improving the entire property then remaining in the partnership. The plans were submitted to contractors for bids, but the partnership was unable to get satisfactory bids due to the difficulties of building at that time.
Neither the Lover's Lane nor the Ventura Tracts were ever advertised for sale or listed for sale with any real estate agent or broker, nor did the taxpayers solicit any offers for sale of such property. The significance of those facts, however, is practically nullified, because they were consistent with the general policy maintained by Sam Lobello, Sr. for some twenty-five years. The majority of his sales were to brokers who came to him knowing that he had property for sale.
The Lover's Lane Tract was in a rapidly expanding retail business area in Dallas. All of the sales, including the two sales in 1946, were made at the behest and solicitation of purchasers who came to the taxpayers and sought to acquire building sites in this area, and all such sales were made because of the difficulties which taxpayers had experienced in getting priority to improve the property; because the prices offered were favorable; and because taxpayers wanted to pay some bank loans.
In 1945 the taxpayers and their friend, Sam Ventura, found that the Ventura Tract consisting of 68.79 acres could be purchased for a reasonable price. They formed the partnership of Ventura & Lobello and purchased the tract. In 1946 they sold the tract to Kathryn Currin, a real estate agent, who accidentally saw the property when she and Sam Lobello, Sr. were riding in the area in which the property was located. There were no improvements upon the Ventura Tract at the time of purchase, and none were planned or made by the partnership. This was the only transaction of the partnership of Ventura & Lobello.
The expression "property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business" would appear to be as simple, explicit and easily understood as the customs of business would permit. It has, nevertheless, proved difficult of application, and has been the subject of repeated consideration by this Court.3 The cases cited illustrate that no rigid rule or fixed formula will furnish an answer to the question. Among the helpful factors that will point the way are: continuity and frequency of sales and sales related activities as opposed to isolated transactions; the extent and substantiality of the transactions; the activity on the part of the taxpayer or those under his instructions in the form of advertising and improvements;...
To continue reading
Request your trial
-
Kueneman v. Comm'r of Internal Revenue
...the taxpayer was a professional or amateur inventor. See, e.g., Hofferbert v. Briggs, 178 F.2d 743, 745 (4th Cir. 1949); Lobello v. Dunlap, 210 F.2d 465 (5th Cir. 1954); Dreymann v. Commissioner, 11 T.C. 153, 162 (1948); Myers v. Commissioner, 6 T.C. 258, 266 (1946); Avery v. Commissioner, ......
-
Tibbals v. United States
...of Internal Revenue, 337 F.2d 1001, 1005 (C.A.9, 1964); Burgher v. Campbell, 244 F.2d 863, 864 (C.A.5, 1957); Lobello v. Dunlap, 210 F.2d 465, 469 (C.A.5, 1954). With regard to the sale of the two lots (in April 1951) to Cozy Cottages, Inc. and the sale of one hundred lots (in June 1952) to......
-
First National Bank of Princeton v. United States
...gain and ordinary income. Such similarity was present in a case which in principle was much like the one sub judice. Lobello v. Dunlap, 5 Cir., 1954, 210 F.2d 465. There the taxpayers were admittedly in the business of buying and selling real property. One tract, however, was purchased for ......
-
Smith v. Commissioner of Internal Revenue
...inevitably within the framework of that calling. On the contrary, we have recognized, e. g., Ross v. Commissioner, supra; Lobello v. Dunlap, 5 Cir., 210 F.2d 465; Delsing v. United States, 5 Cir., 186 F.2d 59, that the fact that the taxpayer as to other properties, in other arrangements or ......