Garrett v. Commissioner

*1256 For the year 1925 the respondent determined a deficiency in tax in the amount of $638. Of this amount $431.06 is in controversy. The issue is whether, in reporting on the installment basis the taxable *1257 profit from a sale of real estate, petitioner may deduct a commission and expenses from the initial payment received on the sale. The facts were stipulated.

FINDINGS OF FACT.

On December 25, 1918, petitioner acquired by gift an unimproved lot in a subdivision known as Garden of Eden in the city of Miami, Dade County, Fla. The fair market value of the lot at that time was $2,500.

In 1925 petitioner sold the lot for a contract sale price of $85,000 and in that year conveyed title to the purchaser by general warranty deed. He received $20,000 of the sale*2229 price in cash in 1925, but no part of the balance was due, payable, or paid to the petitioner in that year.

The balance of the purchase price, to wit, $65,000, was represented by four promissory notes maturing in the years 1926, 1927, 1928, as follows: six months, one, two, and three years, respectively, and payment of the notes was secured by a first mortgage on the land, which mortgage and notes were made and delivered by the purchaser to petitioner in the year 1925.

The petitioner expended $261.50 in 1925 for revenue stamps, abstract and recording fees, and accrued taxes and legal fees incident to and in connection with the sale of the real estate.

The petitioner paid a commission of $5,000 to a real estate broker other than the purchaser in the year 1925 for and in consideration of services rendered by said broker in negotiating the sale of the real estate. The services so rendered were the sole consideration for the payment of the commission and said services were completely performed in 1925. The contract between the petitioner and real estate broker under which the commission was paid was completely performed in the year 1925. The liability of petitioner to pay the*2230 broker his commission was not in any respect contingent upon the above-mentioned promissory notes, representing the deferred payments, being paid, and in the event of default in the payment of said deferred payment notes petitioner had no claim whatsoever for the recovery of any part of the commission paid. The commission paid was reasonable in amount.

The petitioner did not keep books of account during the year 1925, and he reported his income for said year on the cash receipts and disbursements basis.

Petitioner was not a dealer in real estate in the year 1925.

*1258 The petitioner and the respondent computed the taxable profit on the sale here involved as follows:

*2231 OPINION.

ARUNDELL: The question presented in this case is the same as that in , and in accordance with our decision in that case we affirm the respondent's determination.

Decision will be entered for the respondent.