Robinson v. Commissioner of Internal Revenue, 12896.

• Full Citation: Robinson v. Commissioner of Internal Revenue, 181 F.2d 17 (5th Cir. 1950)
• Decision Date: 08 April 1950
• Citation: 181 F.2d 17
• Docket Number: No. 12896.,12896.
• Parties: ROBINSON et al. v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Fifth Circuit

181 F.2d 17 (1950)

ROBINSON et al. v. COMMISSIONER OF INTERNAL REVENUE.

No. 12896.

United States Courts of Appeals Fifth Circuit.

April 8, 1950.

J. Barnwell Phelps, New Orleans, La., for petitioners.

Lee A. Jackson, Ellis N. Slack, Melva M. Graney, Sp. Assts to Atty. Gen., Theron Lamar Caudle, Asst. Atty. Gen., Chas. Oliphant, Chief Counsel, Bureau of Internal Revenue, Washington, D. C., Rollin H. Transue, Sp. Atty., Bureau of Internal Revenue, Washington, D. C., for respondent.

Before HOLMES, McCORD and BORAH, Circuit Judges.

HOLMES, Circuit Judge.

The question presented on this petition for review is whether the taxpayers are entitled to a loss deduction of $10,000 claimed by them under Section 23(e) of the Internal Revenue Code, 26 U.S.C.A. § 23(e). Due to the forgiveness feature applicable to the years 1942 and 1943, the deficiencies involved are for the year 1943, although they resulted from adjustments in income for the year 1942. The taxpayers filed their income-tax returns on a community property basis. The respondent determined a deficiency against each of them based upon the disallowance of a deduction of $10,000 claimed by them on a community property basis in connection with the operations of the Destin Saw Mill Company.

These are the facts: In 1939, Robert G. Robinson bought certain timber rights on land located near Destin, Florida, for $29,000. The purchase agreement provided that the taxpayer would remove the timber from the land within five years, except that on a certain tract the timber was to be removed within two years from December 31, 1938. In 1939, the taxpayer made a bargain with the owner of a sawmill and logging equipment to log and convert the timber into lumber at so much per one thousand feet. Cutting and converting operations began in 1939, and were carried on until 1941, when the Army took over a near-by national forest for bombing activities, thus making it impossible for employees to continue cutting. In 1942, one of the former owners of the timber that Robinson had bought threatened to sue him for damages for timber cut over the line, where he had no right to cut, and for damages to roads owned by claimant. In exchange for a release from all such claims for damages, Robinson gave up his right to cut any remaining timber on the tract. During the same year, he paid to the bank $10,000, which represented the balance due on a note evidencing the purchase price of his cutting rights in that vicinity.

In his income-tax return for 1939, Robinson took a deduction of $16,548.76 as the cost of sales representing timber so purchased, and in 1940 he took a deduction of $14,188.65 as cost of sales of such timber. The total deductions for both years amounted to $30,737.41. In 1943, the taxpayer and his wife filed their income-tax returns on a community property basis, and deducted the sum of $5,000 each, representing a $10,000 loss arising in connection with Robinson's business interest. In upholding the Commissioner's determination, the Tax Court found that he had claimed and been allowed deductions for the entire costs of the timber, $29,000, in years prior to 1942, and was not entitled to the claimed deduction of $10,000 for the year 1943.

In...