Raccoon Development, Inc. v. United States

• Decision Date: 15 March 1968
• Docket Number: 46-64.,No. 45-64,45-64
• Citation: 183 Ct. Cl. 276,391 F.2d 610
• Parties: RACCOON DEVELOPMENT, INC. v. The UNITED STATES. BROOKSIDE SALES, INC. v. The UNITED STATES.
• Court: U.S. Claims Court

183 Ct. Cl. 276, 391 F.2d 610 (1968)

RACCOON DEVELOPMENT, INC. v. The UNITED STATES.

BROOKSIDE SALES, INC. v. The UNITED STATES.

Nos. 45-64, 46-64.

United States Court of Claims.

March 15, 1968.

E. L. Carpenter, Columbus, Ohio, attorney of record, for plaintiffs, Jules E. Garel, Columbus, Ohio, of counsel.

Norman J. Hoffman, Jr., Washington, D. C., with whom was Asst. Atty. Gen. Mitchell Rogovin, for defendant, Philip R. Miller, Washington, D. C., of counsel.

Before COWEN, Chief Judge, and LARAMORE, DURFEE, DAVIS, COLLINS, SKELTON and NICHOLS, Judges.

PER CURIAM:

This case was referred to Trial Commissioner George Willi under the order of reference and Rule 57(a) with directions to make findings of fact and recommendation for conclusions of law. The commissioner has done so in an opinion and report filed on November 30, 1967. Plaintiff has filed no exceptions to or brief on this report and the time for so filing pursuant to the Rules of the court has expired. On January 22, 1968, defendant filed a motion that the court adopt the opinion, findings and conclusion of the trial commissioner. Since the court agrees with the commissioner's findings, opinion, and recommended conclusion of law, as hereinafter set forth, it hereby adopts the same as the basis for its judgment in this case without oral argument. Therefore, plaintiffs are not entitled to recover and the petitions are dismissed.

OPINION OF COMMISSIONER

WILLI, Commissioner:

These consolidated cases, presented on a fully stipulated record, raise but one issue — the taxable base to which the ad valorem documentary stamp levy imposed on real estate transfers by section 4361 of the Internal Revenue Code of 1954 is to be applied. The real estate involved consisted of lots improved by new prefabricated dwelling houses. The question is whether the documentary stamp tax properly attaches to the total price that the home buyer paid for the house and lot or only to the portion of that price attributable to the lot.

The facts, elaborated in the findings of fact accompanying this opinion, need only be summarized here.

The plaintiffs, referred to herein as "Raccoon" and "Brookside Sales," are Ohio corporations in the business of land development for residential purposes. They conducted their land operations in conjunction with three sister corporations; Brookside Builders, Inc. and Courtesy Homes, Inc., both engaged in building prefabricated homes, and Courtesy Homes Sales, Inc., exclusive sales agent for Brookside Builders and Courtesy Homes. Significantly, one individual, Mr. Byron E. Schofield, was the controlling shareholder and principal officer of all of these corporations throughout the period in suit.

Neither Raccoon nor Brookside Sales sold residential lots except in conjunction with the sale of a prefabricated house constructed by their affiliates.

Between November 1, 1958 and October 31, 1962, the period in issue as to both plaintiffs, Raccoon conveyed 128 lots to purchasers of prefabricated homes and Brookside Sales conveyed 683 lots to such purchasers.

Code section 4361 imposes a tax on all deeds of real estate where the value of the property involved exceeds $100. The prescribed tax rate is 55 cents for each $500 increment of value or fractional part thereof.

In calculating their documentary stamp tax liability on the conveyances mentioned above, plaintiffs applied the 55-cent rate only to what they regarded as the portion of the total price paid by the home buyer that was attributable to land. Tax deficiencies and interest were assessed by the Commissioner of Internal Revenue on the theory that tax was due on the full price paid by the home buyer for his house and lot. The deficiencies and interest were duly paid and timely claims for refund were filed. After formal disallowance of the claims the instant suit followed.

In presenting the cases here the parties have agreed that all real estate transactions underlying the taxes in dispute are typified and fairly illustrated by one involving the purchase of a home from Brookside Builders by Mr. and Mrs. Leo Colborn of Gahanna, Ohio, a suburb of Columbus.

At the root of the Colborn transaction was an October 1960 agreement between Brookside Sales and Brookside Builders, both headed and controlled by Byron Schofield, under which Sales, the land development company, bound itself to fully develop the lots comprising the Royal Manor Addition at Gahanna and gave Builders the exclusive right to purchase such fully developed lots at $3,250 each. Sales agreed to convey the lots to either Builders or its nominee, whichever directed by Builders.

Homes of the type purchased by the Colborns were advertised by Builders in the Gahanna newspaper. The theme of the advertising was clearly directed to the sale of a house and lot for a single total price. In fact, the parties have stipulated (1) that none of plaintiffs' lots were sold or offered for sale except in conjunction with the sale of a prefabricated house erected by plaintiffs' affiliate and (2) that all interested home buyers believed that they were making a single purchase consisting of a house and lot.

The following is a chronological summary of the Colborn transaction.

On October 23, 1960, the Colborns signed an agreement with Builders to purchase a Royal Manor home for a price not to exceed $14,600 plus closing costs.

On November 30, 1960, after completion of a satisfactory investigation of their credit, the Colborns signed a so-called Construction Agreement with Builders for the purchase of a specific Royal Manor lot and home to be built on it. The agreement recited a price of $11,900 for the house and $2,700 for the lot.

On the same date, Mr. Colborn, a Navy veteran, filed an application for VA financing totalling $14,600 for the purchase of "improved realty" with no price breakdown shown as between house and lot.

On January 5, 1961, the Veterans Administration issued a loan guarantee commitment covering a $14,600 loan to the Colborns repayable over...