Irish v. Commissioner

1969 T.C. Memo. 45, 28 T.C.M. 252, 1969 Tax Ct. Memo LEXIS 250
CourtUnited States Tax Court
DecidedMarch 10, 1969
DocketDocket No. 1585-67.
StatusUnpublished

This text of 1969 T.C. Memo. 45 (Irish v. Commissioner) is published on Counsel Stack Legal Research, covering United States Tax Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Irish v. Commissioner, 1969 T.C. Memo. 45, 28 T.C.M. 252, 1969 Tax Ct. Memo LEXIS 250 (tax 1969).

Opinion

Aarol W. Irish and Elaine M. Irish v. Commissioner.
Irish v. Commissioner
Docket No. 1585-67.
United States Tax Court
T.C. Memo 1969-45; 1969 Tax Ct. Memo LEXIS 250; 28 T.C.M. (CCH) 252; T.C.M. (RIA) 69045;
March 10, 1969, Filed
Michael J. Mehr and Basil M. Briggs, 3000 Guardian Bldg., Detroit,Mich., for the petitioners. Ralph F. Keister, for the respondent.

WITHEY

Memorandum Findings of Fact and Opinion

WITHEY, Judge: The Commissioner determined deficiencies in petitioners' income tax for the calendar years and in the amounts as follows:

YearAmount
1962$ 211.14
19636,781.72

The principal issue presented for our determination is whether petitioner purchased four houses with the intent to demolish them, so as to be foreclosed from taking a loss deduction under section 165 of the Internal Revenue Code of 1954. 1 If not, has petitioner adequately established the adjusted bases of these houses at the time of their demolition and removal?

*251 Findings of Fact

Some of the facts have been stipulated and are found accordingly.

Petitioners, husband and wife, resided at Saginaw, Michigan, both at the filing of the petition and at the time of trial. They filed a joint Federal income tax return for each of the calendar years 1961, 1962, and 1963 with the district director of internal revenue at Detroit, Michigan. They also filed timely refund claims and amended Federal income tax returns for the years 1962 and 1963 with the district director of internal revenue at Detroit, Michigan. Inasmuch as Elaine M. Irish is joined here only by virtue of the joint returns filed with her husband for 1962 and 1963, the term "petitioner" will hereinafter be used to designate Aarol W. Irish.

Petitioner, whose offices are in Saginaw, Michigan, has been a general agent of the Union Mutual Life Insurance Company of Portland, Maine, since 1950. As a result of an insurance course which petitioner attended, he developed an interest in purchasing rental properties for the future security and education of his children. Petitioner's family had seven children in 1961, eight in 1962, and nine in 1963. At a later date and sometime prior to April 7, 1961, petitioner*252 was contacted by a social acquaintance who owned two houses located at 1600 and 1606 N. Michigan Avenue, Saginaw, Michigan (hereinafter 1600 and 1606), for the purpose of inducing petitioner's purchase of the homes. On the condition that petitioner would purchase both homes, he was given the option on April 7, 1961, to purchase 1600 for $16,000 and 1606 for $14,000. The option was exercised by petitioner on May 20, 1961. In order to purchase those properties, petitioner borrowed approximately $26,000 from his business partner, petitioner supplying the balance of the purchase money from his own funds. Then, on June 28, 1961, and August 11, 1961, petitioner acquired options to purchase two other houses located at 1612 and 1618 N. Michigan Avenue (hereinafter 1612 and 1618). 2 The option on 1612 was exercised on August 29, 1961, and the option on 1618 was exercised on August 15, 1961. The purchase of the real estate located at 1612 and 1618 was closed on October 10, 1961, petitioner paying $16,113.87 for 1612 and $15,052.85 for 253 1618. 3 Petitioner purchased 1612 and 1618 by placing a single consolidated bank mortgage in the approximate amount of $56,000 on all four parcels of*253 real estate. Prior to the acquisition of the four houses in question, petitioner had very little real estate experience.

The houses acquired by petitioner were in a generally residential neighborhood, although the particular block on which petitioner's houses were located was bounded on the west by N. Michigan Avenue, on the east by the tracks of the New York Central Railroad, to the north by the Sunshine Biscuit Company, and to the south by Draper Chevrolet Company (hereinafter Draper), a Chevrolet dealership. St. Luke's Hospital was diagonally across N. Michigan Avenue. At the time of acquisition, as well as at the time of trial, the properties immediately adjacent to 1600-1618, both to the north*254 and south as well as directly across N. Michigan Avenue, consisted of residential housing.

Inasmuch as the four houses were in various states of disrepair immediately prior to the time petitioner acquired them, petitioner, in order to obtain funds necessary to complete the purchase of 1612 and 1618, made certain repairs so as to induce the bank to appraise the properties at higher values than it might otherwise have done. Prior to October 10, 1961, petitioner expended the following amounts for repairs:

ItemDate paidAmount
Tree service7/ 1/61$ 41.00
Plumbing8/31/616.00
Materials8/29/6113.40
Painting8/31/61130.00

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Bluebook (online)
1969 T.C. Memo. 45, 28 T.C.M. 252, 1969 Tax Ct. Memo LEXIS 250, Counsel Stack Legal Research, https://law.counselstack.com/opinion/irish-v-commissioner-tax-1969.