Ottawa Park Realty Co. v. Commissioner

5 B.T.A. 474, 1926 BTA LEXIS 2852

• Court: United States Board of Tax Appeals
• Decided: November 12, 1926
• Docket: Docket No. 5907.
• Status: Published

Opinions

OPINION.

Trammell:

The taxpayer, which was engaged during the year in question in developing a tract of land for the purpose of subdivision and sale, contends that it is entitled to add, as a part of the cost of each lot, mortgage interest and taxes paid upon each lot prior to its sale. The adjustments made by the Commissioner arise from his contention that such interest and taxes are deductions which are to be taken annually in computing income and can not be treated as additional cost of such property or as an investment of capital.

Under the statute interest and taxes are deductions which are to be taken annually in computing net income. The statute does not leave the question open to taxpayers and permit them to decide whether such payments are to be treated as capital expenditures or as deductible expenses, but provides that such payments shall be allowed as deductions from gross income in determining net income. They can not be treated as capital expenditures and added to the cost of the property in determining gain or loss from the sale thereof. Westerfield v. Rafferty, 4 Fed. (2d) 590; Appeal of Columbia Theatre Co., 3 B. T. A. 622.

Judgment will be entered on 10 days’ notice under Rule 50.