Estate of Berry v. Commissioner

Sixth Circuit

Estate of Berry v. Commissioner

372 F.2d 476, 19 A.F.T.R.2d (RIA) 612, 1967 U.S. App. LEXIS 7550

CourtCourt of Appeals for the Sixth Circuit

DecidedFebruary 3, 1967

DocketNos. 16781, 16782

StatusPublished

Cited by1 cases

This text of 372 F.2d 476 (Estate of Berry v. Commissioner) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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Estate of Berry v. Commissioner, 372 F.2d 476, 19 A.F.T.R.2d (RIA) 612, 1967 U.S. App. LEXIS 7550 (6th Cir. 1967).

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Opinion

PER CURIAM.

The only issue presented in this case is whether or not the Tax Court was right in determining that $440,000 of the $1,683,237.77 profit made by petitioners-appellants on the sale of the Raleigh Hotel in Washington, D. C. constituted gross income¹ for Federal income tax purposes rather than a capital gain. Estate of Betty Berry v. Commissioner of Internal Revenue, 43 T.C. 723 (1965); Raleigh Properties Inc. v. Commissioner of Internal Revenue, 21 CCH Tax Ct. Mem. 812 (1962).

The Tax Court reviewed the transaction in detail. It noted particularly the inclusion in the final sale documents of a discount schedule in the event of prepayment. The effect of the discount schedule would be to equate a purchase price of $2,800,000, plus 4%% interest. These were the basic terms of the last offer made by purchasers prior to the terms as contained in the final purchase documents. The Tax Court held that the $400,000 was interest in the contemplation of the parties and hence ordinary income — even if the contract itself specifically provided for no interest.²

In this regard the Tax Court looked past the form of the transaction and to the substantive intent of the parties, as disclosed by the total circumstances. We believe this is entirely in accord with established precedent. Commissioner v. Court Holding Co., 324 U.S. 331, 65 S.Ct. 707, 89 L.Ed. 981 (1945).

Affirmed.

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PER CURIAM.

The only issue presented in this case is whether or not the Tax Court was right in determining that $440,000 of the $1,683,237.77 profit made by petitioners-appellants on the sale of the Raleigh Hotel in Washington, D. C. constituted gross income¹ for Federal income tax purposes rather than a capital gain. Estate of Betty Berry v. Commissioner of Internal Revenue, 43 T.C. 723 (1965); Raleigh Properties Inc. v. Commissioner of Internal Revenue, 21 CCH Tax Ct. Mem. 812 (1962).

The Tax Court reviewed the transaction in detail. It noted particularly the inclusion in the final sale documents of a discount schedule in the event of prepayment. The effect of the discount schedule would be to equate a purchase price of $2,800,000, plus 4%% interest. These were the basic terms of the last offer made by purchasers prior to the terms as contained in the final purchase documents. The Tax Court held that the $400,000 was interest in the contemplation of the parties and hence ordinary income — even if the contract itself specifically provided for no interest.²

In this regard the Tax Court looked past the form of the transaction and to the substantive intent of the parties, as disclosed by the total circumstances. We believe this is entirely in accord with established precedent. Commissioner v. Court Holding Co., 324 U.S. 331, 65 S.Ct. 707, 89 L.Ed. 981 (1945).

Affirmed.

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372 F.2d 476, 19 A.F.T.R.2d (RIA) 612, 1967 U.S. App. LEXIS 7550, Counsel Stack Legal Research, https://law.counselstack.com/opinion/estate-of-berry-v-commissioner-ca6-1967.

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