Pickus v. Commissioner
| Decision Date | 30 December 1963 |
| Docket Number | Docket No. 90659. |
| Citation | 22 TCM (CCH) 1791,1963 TC Memo 342 |
| Parties | Abe Pickus and Etta Pickus v. Commissioner. |
| Court | U.S. Tax Court |
Martin A. Rini, 830 Bulkley Bldg., Cleveland, Ohio, for the petitioners. Buckley D. Sowards for the respondent.
Memorandum Findings of Fact and Opinion
Respondent determined deficiencies in income tax and an addition to tax for the calendar years and in the amounts as follows:
Addition to Tax
Sec. 294(d)(2)
Year Deficiency 1939 Code
1949...... $ 1,233.92
1950...... 6,438.20
1952...... 51,480.33 $3,304.27
1954...... 3,002.43
1955...... 3,738.62
1956...... 4,110.05
1957...... 14,060.63
1958...... 5,193.15
In addition, an overassessment of $3,245.70 was determined for 1951.
The issues for decision are stipulated to be as follows:
(1) Whether the petitioners, doing business as A. & E. Pickus Company, a partnership, are in the business of selling real estate so that gain realized from the sale of land is ordinary income;
(2) Whether a certain note and mortgage received from Nathan Staman should be included in petitioners' income for the year 1952;
(3) The proper year for including the gain realized from the sale of the following property:
(4) Whether income identified as "income from Robert Levin, trustee" was taxable to the petitioners as ordinary income or as capital gain;
(5) Whether the income received by Mendotta, Inc., and Corkhill, Inc., should be attributed to the A. & E. Pickus Company, partnership; and
(6) Whether petitioners are liable for the addition to tax under section 294(d)(2) for the year 1952.
Other adjustments made by the respondent for the years 1949, 1950, 1952, and 1954 through 1958, inclusive, are not contested by the petitioners.
Some of the facts have been stipulated and have been incorporated herein.
Petitioners, Abe Pickus (sometimes hereinafter referred to as Abe) and Etta Pickus (sometimes hereinafter referred to as Etta), are husband and wife and reside in Shaker Heights, Ohio. For the calendar years 1949 through 1958, petitioners filed joint Federal income tax returns on the cash basis of accounting with the district director of internal revenue or his predecessor, the collector of internal revenue, Cleveland, Ohio.
In January 1942, Abe and Etta formed a partnership known as A. & E. Pickus Company (hereinafter sometimes referred to as A&E). For the calendar years 1949 through 1958, partnership returns were filed with the district director of internal revenue or his predecessor, the collector of internal revenue, Cleveland, Ohio. A&E used an accrual basis of accounting. The partnership received the bulk of its income from various rental properties, management fees, and from the sales of land here involved. Abe carried on the daily business of the partnership while Etta kept the records of cash transactions.
Beginning in 1939 the Cuyahoga County auditor embarked upon a program of selling at forfeited land sales thousands of parcels of land after advertising the same for sale in the newspapers and after giving public notice that the parcels of land would be sold to the highest bidder.
The following schedule shows the number of parcels advertised by the Cuyahoga Country auditor, the number of sales, the average tax assessment value, and the average successful bid price for the years 1939 through 1958:
Average Tax Average
Parcels Assessment Successful
Year Advertised Sold Value Bid Price
1939.. Unknown 539 $706.17 $137.66
1940.. 1,944 1,103 579.74 111.59
1941.. 5,623 1,420 455.45 72.22
1942.. None None
1943.. None None
1944.. 3,217 3,152 440.40 203.55
1945.. 3,397 3,050 456.22 433.15
1946.. 3,535 3,090 385.18 356.64
1947.. 6,552 4,432 404.23 189.30
1948.. 12,851 9,388 307.09 166.72
1949.. 13,737 9,588 274.67 161.25
1950.. 12,694 7,190 318.44 374.30
1951.. None None
1952.. 5,865 2,284 370.87 472.53
1953.. 1,842 781 337.34 475.60
1954.. 583 179 317.93 571.56
1955.. 161 72 390.27 555.69
1956.. None None
1957.. None None
1958.. 557 264 Unknown Unknown
Buyers at these sales received title free and clear of all encumbrances, including the abatement of any delinquent taxes and assessments. For the years 1944 and 1945 future assessments were also abated. Abe attended some of the sales and purchased lots and acreage for the partnership. In order to finance the partnership in these purchases petitioners sold stock and securities which they held, and a three-family house on Overlook Road in Cleveland Heights.
The number of lots and acreage purchased by the petitioners as individuals prior to 1942 and as a partnership from 1942 through 1958 is as follows:
--------------------------------------------------------------------------------------------------------
Purchased Sold
Undivided Undivided Fractional
Acreage Fractional Interest
Year Lots Interest Lots Acreage Lots Acreage
--------------------------------------------------------------------------------------------------------
1940..... 9 .. ............. .. .. .............
1941..... 52 .. ............. 1 .. .............
1942..... 2 .. ............. 6 .. .............
1943..... None .. ............. 2 .. .............
1944..... None .. ............. .. .. ............. ............
1945..... .... .. 1/3 —1 lot 5 .. ............. ............
1946..... 13 2 ............. 2 .. ............. ............
1947..... 231 .. ............. 22 .. ............. ............
1948..... 249 1 3/4 —35 lots 22 .. ............. ............
.... .. 1/2 —149 lots .. .. ............. ............
.... .. 1/6 —65 acres .. .. ............. ............
1949..... .... .. 1/2 —Acreage 43 .. ............. 1/6 —acres
1950..... 85 1 1/5 —Acreage 35 2 1/3 —1 lot 1/5 —Acreage
.... .. 1/7 —Acreage .. .. 3/4 —1 lot 1/7 —Acreage
.... .. 1/2 —10 lots .. .. ............. .............
.... .. 1/5 —157 lots .. .. ............. .............
.... .. 1/2 —1 lots .. .. ............. .............
.... .. 1/10—44 lots .. .. ............. .............
.... .. 1/5 —226 lots .. .. ............. .............
.... .. 1/3 —25 lots .. .. ............. .............
.... .. 1/2 —1 lot .. .. ............. .............
.... .. 1/5 —Acreage .. .. ............. .............
1951..... 14 1 1/5 —1 lot 20 1 ............. .............
1952..... 28 .. 1/3 —52 lots 33 1 1/2 —163 lots .............
.... .. 1/2 —2 lots .. .. ............. .............
.... .. 1/2 —185 lots .. .. ............. .............
.... .. 1/3 —6 lots .. .. ............. .............
.... .. 1/2 —2 lots .. .. ............. .............
1953..... 14 .. 1/2 —2 lots 20 .. ............. .............
.... .. 1/5 —70 lots .. .. ............. .............
1954..... 12 .. 1/5 —Acreage 15 .. 1/5 165 lots .............
.... .. 1/3 —9 lots .. .. 1/3 —61 lots .............
1955..... 7 .. 1/3 —Acreage 33 .. ............. .............
.... .. 1/4 —Acreage .. .. ............. .............
1956..... .... .. 1/5 —2 lots 20 .. ............. .............
1957..... None .. ............. 18 .. ............. .............
1958..... 1 .. 1/2 —1 lot 17 .. ............. .............
.... .. 1/6 —Acreage .. .. .............
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