Weiss v. Commissioner of Internal Revenue
| Decision Date | 13 May 1955 |
| Docket Number | No. 15182.,15182. |
| Citation | 221 F.2d 152 |
| Parties | Gilbert WEISS, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Martin A. Rosenberg and Rodney Weiss, St. Louis, Mo. (Gilbert Weiss, St. Louis, Mo., pro se, was with them on the brief), for petitioner.
C. Guy Tadlock, Sp. Asst. to the Atty. Gen. (H. Brian Holland, Asst. Atty. Gen., and Ellis N. Slack and George F. Lynch, Sp. Assts. to the Atty. Gen., were on the brief), for respondent.
Before SANBORN, COLLET and VAN OOSTERHOUT, Circuit Judges.
This is a petition to review a decision of the Tax Court redetermining a deficiency in the petitioner's income tax for the year 1947. The deficiency (except for a small amount not in controversy) resulted from the disallowance by the Commissioner of Internal Revenue of a deduction of $15,633.71 taken by the petitioner in his tax return for that year as a loss resulting from the failure of a housing project or joint venture known as the "Norlan Project" (also referred to in the record and briefs as "Norland Project"), with which the petitioner claimed to have terminated his connection in 1947.
The disallowance of this deduction by the Commissioner was based upon his conclusion that the petitioner had not withdrawn from the project in 1947, but had continued his connection with it until December, 1948, and had sustained no loss deductible from gross income in 1947 under Section 23(e) (2) of the Internal Revenue Code, 26 U.S.C.A. § 23 (e) (2)1 and the applicable regulations.2
It was the position of the petitioner before the Tax Court that in 1947 he sustained a deductible loss of $15,633.71 as the result of the failure of one joint venture, and that in 1948 he sustained a loss of $5,742.98 in another unsuccessful joint venture, and that the two losses and the two joint ventures were separate and distinct. The position of the Commissioner was that the losses which the petitioner regarded as separate losses from two distinct joint ventures constituted together a loss from one joint venture only and that the loss was sustained in 1948 and no part of it was deductible from gross income in 1947.
What the Tax Court was called upon to decide was whether the petitioner had sustained deductible losses in each of the years 1947 and 1948, as he claimed, rather than a single loss deductible only in 1948, as the Commissioner had determined.
The case was submitted to the Tax Court upon a stipulation of facts and the testimony of the petitioner and of witnesses produced by him. The parties stipulated that the Tax Court might find as facts that:
The record shows that the petitioner, a practicing attorney, and his two associates, Miller, a realtor, and Hanlon, a consulting architect and engineer, in 1946 procured an option to purchase for $55,000 some 22 acres of land in St. Louis, Missouri, upon which they proposed, with Government assistance, to construct a multiple housing project under the Federal Housing Act; that plans and specifications were prepared and application made to the Federal Housing Administration for a permit for the building of the project; that the cost could not be brought within the estimates made by the Housing Administration; that the joint venturers could not meet its requirement that they deposit in escrow $180,000, the difference between their cost estimate and that of the Administration; that the option on the land was extended from time to time during 1946 and 1947, until October 15, 1947, and that the Investors Syndicate, with which petitioner and his associates had arranged for a F.H.A. building loan, withdrew its commitment on November 5, 1947; that petitioner told his associates that he could not go through with the project and was closing the matter as of December 31, 1947; that they suggested that he go to Washington, D. C., which he did, to no avail; that in December, 1947, the petitioner and Miller, who were to divide the expenses of the joint venture between them, balanced their accounts; that the venture — which the petitioner testified consisted in January, 1948, of Miller and Hanlon — paid the rent for that month on the office it occupied; that the assets of the joint venture consisted of office furniture and equipment and the plans and specifications prepared by Hanlon; and that the petitioner's total expenditures in 1947 on account of the joint venture were $15,633.71.
The record also shows that in the latter part of January, 1948, Leo Laughren, a St. Louis attorney, told the petitioner that he had heard that the petitioner "had a housing project that had gone sour"; that the petitioner stated that it had so far as he was concerned because he could not afford the amount of money necessary to continue it; that Laughren referred the petitioner to Horace Deal, of the H. B. Deal Construction Company; that the petitioner saw Deal in February, 1948, and arranged with him that if Hanlon would work with Deal's engineers and architects in revising the plans and "reducing the estimate and bring it within the F.H.A. specifications" and if the project was built or sold, the petitioner and Miller would get their money back and Hanlon would be paid an equivalent amount for his services; that the 22-acre tract of land was held available by its owners for purchase by petitioner and his associates during 1948; that on November 12, 1948, the petitioner, by letter, had requested "that the option be extended until January 15th," 1949, on terms, which the owners accepted; that the H. B. Deal Construction Company tried, by changing the plans, to bring down the cost, but finally decided not to take over the project; that the deductions petitioner took for a loss in 1948 represented what he spent on account of the project from February, 1948, to the close of that year.
The petitioner's contention is that it conclusively appears from the evidence that his connection with...
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