Winnett v. Helvering

• Decision Date: 29 January 1934
• Docket Number: No. 7152.,7152.
• Citation: 68 F.2d 614
• Parties: WINNETT et al. v. HELVERING, Commissioner of Internal Revenue.
• Court: U.S. Court of Appeals — Ninth Circuit

68 F.2d 614 (1934)

WINNETT et al. v. HELVERING, Commissioner of Internal Revenue.

No. 7152.

Circuit Court of Appeals, Ninth Circuit.

January 29, 1934.

Thomas R. Dempsey, A. Calder Mackay, and Howard W. Reynolds, all of Los Angeles, Cal., for petitioners.

Sewall Key, Head, Tax Section, and Norman D. Keller, Sp. Asst. to Atty. Gen., for respondent.

Before WILBUR, SAWTELLE, and GARRECHT, Circuit Judges.

WILBUR, Circuit Judge.

This is a petition to review a decision of the Board of Tax Appeals on a petition thereto by the testator, John G. Bullock. Petitioners claimed that the Commissioner of Internal Revenue erred in refusing to allow a deduction from the income of the testator for the year 1924 of the sum of $16,854, which represented the expense of moving a dwelling house from a lot owned by testator at the corner of Wilshire boulevard and Vermont avenue, in Los Angeles, to a residence lot on Plymouth boulevard, in Los Angeles, Cal. The claim advanced by the petitioners here and before the Board of Tax Appeals was that this item of expenditure was an ordinary and necessary expenditure incurred during the taxable year 1924 in a trade or business carried on by the testator, within the meaning of the Revenue Act of 1924, c. 234, § 214 (a) (1), 43 Stat. 253, 26 USCA § 955 (a) (1), as follows:

"Revenue Act of 1924, c. 234, 43 Stat. 253:

"Sec. 214. (a) In computing net income there shall be allowed as deductions: (1) All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business."

The Commissioner held that the expenditure in question was a capital expenditure which could not be deducted from income under the provisions of section 215 (a) (2) of the Revenue Act of 1924, 26 USCA § 956 (a) (2), which is as follows:

"Sec. 215. (a) In computing net income no deduction shall in any case be allowed in respect of — * * *

"(2) Any amount paid out for new buildings or for permanent improvements or betterments made to increase the value of any property or estate."

In its opinion it is stated by the Board of Tax Appeals:

"The facts here clearly show that the cost of moving the dwelling from Wilshire Boulevard and Vermont Avenue to Plymouth Boulevard falls within that class of expenditures referred to in section 215, that is, that it was an amount paid out for permanent improvements or betterments made to increase the value of the petitioner's property, as distinguished from an ordinary and necessary business expense. The petitioner testified that he moved the house with the idea of renting or selling it in its new location and also for the purpose of rendering the lot on Wilshire Boulevard and Vermont Avenue more available for business purposes. * * *

"We think that the respondent has properly classified the expenditure in question as a capital expenditure although from the record we are unable to determine whether the amount should be added in whole or in part to the cost of the lot at Wilshire Boulevard and Vermont Avenue or to the property on Plymouth Boulevard now occupied by the petitioner as his permanent residence."

There is no specific finding by the Board of Tax Appeals as to whether or not the expenditure for the removal of the house was incurred "in carrying on any trade or business" by the taxpayer, nor is there any allegation in the petition before the Board that the expenditure was incurred "in carrying on any trade or business" by the taxpayer. This was one of the ultimate facts upon which the contention of the taxpayer was based. The nearest approach to such an allegation in the petition to the Board of Tax Appeals is the statement that "one of taxpayer's businesses was to rent or sell the various properties he owned other than his private residence." The transcript does not contain the evidence upon which the Board of Tax Appeals acted, and, consequently, the question whether or not the...