Seaside Improvement Co. v. Commissioner of Int. Rev.

Citation105 F.2d 990
Decision Date17 July 1939
Docket NumberNo. 238-243.,238-243.
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Benjamin Mahler, of New York City (Sol A. Klein, of Brooklyn, N. Y., of counsel), for petitioners.

James W. Morris, Asst. Atty. Gen., and Sewall Key and Warren F. Wattles, Sp. Assts. to Atty. Gen., for respondent.

Cuthell, Appleby, Osterhout & Mills, of New York City (Francis S. Appleby and John B. Coman, both of New York City, of counsel), for amicus curiæ.

Before SWAN, CHASE, and CLARK, Circuit Judges.

SWAN, Circuit Judge.

This appeal involves the income tax liability of each of the six petitioners for the year 1931. Each of them owned waterfront property in the Seaside section of Rockaway Beach, part of which the City of New York took by condemnation in July 1925 for a public beach and board walk. The condemnation awards, however, were not paid to the petitioners until 1931.1 Upon audit of their respective tax returns for that year, the commissioner determined that certain profits were realized as a result of the condemnation awards received by them, and assessed deficiencies. Upon appeal to the Board, their respective tax liabilities were redetermined, with the result that deficiencies were found due from three of the taxpayers (Seaside Improvement Company, Estate of Margaret Wainwright and Wainwright, Remsen & Tator Corporation), and overpayments, based on items not material to the present issues, were found to have been made by the other three taxpayers (Jamieson Associates, Inc., Wainwright & Smith Company and John W. Wainwright). All six taxpayers have appealed from that part of the Board's decision which sustained the commissioner's determination as to profits realized by them respectively from the condemnation awards.

Four questions are presented to this court: (1) Whether the Board erred in determining the March 1, 1913, value of the property taken from four of the petitioners, who had acquired their respective parcels of land prior to that date; (2) whether the Board erred in determining the cost basis of the property taken from the Estate of Margaret Wainwright and from Jamieson Associates, Inc., who respectively acquired title in September and October 1923; (3) whether the Board erred in determining that none of the awards included consequential or severance damages to property not condemned; (4) whether the Board erred in holding in the cases of John W. Wainwright and Estate of Margaret Wainwright that the portion of their awards denominated "interest" was taxable as ordinary income, not as capital gain.

(1) The four taxpayers whose basis for determining gain or loss is the March 1, 1913, value of the land taken by condemnation, contend that between 1913 and 1925 the opening of additional beaches in the vicinity and other changes in economic conditions affecting the Seaside section resulted in a reduction in the value of their property; and they point to a decline in rentals during this period as corroborating their contention. The Board, however, found that the land condemned was more valuable in 1925 than in 1913. Its findings of fact are set forth in detail in 37 B.T.A. 92. Specifically the Board found the 1913 value of the land condemned to be $275 per front foot in the cases of John W. Wainwright, Wainwright & Smith Company and Wainwright, Remsen & Tator Corporation and $226.87 per front foot in the case of Seaside Improvement Company. There was no dispute as to the amount of ocean frontage as to which the front foot values were applied. Findings of fact by the Board are conclusive upon the court if supported by substantial evidence. We regard this principle as applicable even when the findings, because of the expiration of the term of office of the Board's member who heard the testimony, are made by his successor in office and, therefore, are based upon a stenographic record of the testimony. Consequently, our duty in the case at bar is not to determine whether a preponderance of the evidence points to contrary conclusions but whether any substantial evidence supports the essential findings of fact. See Patterson v. Commissioner, 2 Cir., 42 F.2d 148, 149.

With respect to the three first-named taxpayers the front foot valuation found by the Board is in substantial accord with the testimony of Messrs. Terry and May. The petitioners criticize the qualifications of these witnesses, but we cannot say upon this record that the Board was bound to accept the testimony of the petitioners' experts in preference to that of the experts called by the commissioner.

With respect to the land of Seaside Improvement Company, the commissioner offered no direct testimony of its 1913 value; he contended that this taxpayer had no title to the land condemned and that the condemnation award in its entirety was gain — a contention which the Board rejected. The property of Seaside Improvement Company lies to the east of the main business district, where values were highest and where the properties of the three other taxpayers were located; hence, a finding that it was less valuable than the land of Wainwright & Smith Company, the nearest of the petitioners' properties to the west, is supportable. The Board fixed its front foot value at 82.3% of that of the Wainwright & Smith Company. The commissioner's brief on appeal states, without contradiction by the petitioner, that in the argument before the Board it was urged that the front foot value of Seaside Improvement Company's property was 82.3% of the front foot value ascribed to the property of Wainwright & Smith Company. The acceptance by the Board of a fact asserted by the taxpayer can scarcely be urged as a ground for reversal of its decision. In our opinion the findings as to 1913 value are supported by substantial evidence.

(2) With respect to the property of the Estate of Margaret Wainwright, whose death occurred September 10, 1923, and the property of Jamieson Associates, Inc., acquired in October, 1923, the Board found that there was no substantial change in value between the summer of 1923 and the date of condemnation, July 15, 1925. As to the Margaret Wainwright property the evidence showed a tendency toward a decline in value because of an influx of negroes during this period. Both petitioners argue that the amounts awarded them respectively in condemnation conclusively fix the fair market value in 1925 of the property condemned, and, since there was no advance over the 1923 value, no gain was realized. The Board rejected this contention, found that the awards were largely in excess of the fair market value of the property taken, and determined the 1923 value to be $60,353.10 for the Margaret Wainwright property and $21,798.81 for the Jamieson property.

The petitioners have cited no authority supporting their contention that a judicial award must be accepted by one not a party to the condemnation proceedings as determinative of the fair market value at the time of condemnation of the property condemned. In our opinion such an award is merely some evidence of the fair market value of the tract to be appraised, as is a sale of other property similarly situated (Heiman v. Bishop, 272 N.Y. 83, 88, 4 N.E. 2d 994) or a bona fide offer for the tract itself. Manufacturers Paper Co. v. Commissioner, 2 Cir., 89 F.2d 684, 686. The Board was of opinion that the awards exceeded market value because the awards as a whole had been reduced approximately $3,000,000 and acquiescence in the reduced figures was recommended to the city by its counsel on account of financial distress and to avoid the expense of further litigation and additional interest charges. Furthermore, the estate tax return filed by the executor of the Estate of Margaret Wainwright stated the 1923 value of her entire tract, only a small part of which was condemned, as $79,500, and the executor admitted on cross-examination that he considered this figure correct. The amount of the award for the Margaret Wainwright property ($133,268.40) is so disproportionate to the 1923 value admitted by the executor, that we think the Board was justified in finding that the award exceeded fair market value in 1925, since concededly the value in the two years was...

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21 cases
  • Nichols v. Comm'r of Corps. & Taxation
    • United States
    • United States State Supreme Judicial Court of Massachusetts
    • June 30, 1943
    ...170, 185. See, also, American Viscose Corp. v. Commissioner of Internal Revenue, 3 Cir., 56 F.2d 1033.Seaside Improvement Co. v. Commissioner of Internal Revenue, 2 Cir., 105 F.2d 990, 994, relied on by the taxpayer in the Nichols cases, is not in conflict with the conclusion here reached. ......
  • Commissioner of Internal Revenue v. Kieselbach
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • April 7, 1942
    ...of Internal Revenue, 9 Cir., 1942, 126 F.2d 4. This follows the view of the Second Circuit in Seaside Improvement Co. v. Commissioner of Internal Revenue, 2 Cir., 1939, 105 F. 2d 990; Commissioner of Internal Revenue v. Appleby's Estate, 2 Cir., 1941, 123 F.2d 700 and seems to us, as it did......
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    • United States
    • United States Supreme Court
    • January 4, 1943
    ...of conflict upon the point between this case below, Commissioner v. Kieselbach et al., 3 Cir., 127 F.2d 359 and Seaside Improvement Co. v. Commissioner, 2 Cir., 105 F.2d 990. The taxpayers owned a piece of realty in the City of New York. In December, 1932, that city's Board of Estimate pass......
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    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • May 30, 1960
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