Estate of Dugan v. Commissioner

Memorandum Findings of Fact and Opinion

Respondent determined a deficiency in the income tax liability of Elizabeth Dugan, deceased, for the period January 1, to March 13, 1939, the latter date being the date of her death. The amount of the deficiency determined was $386.91. The petition filed herein alleges several errors on the part of respondent in making this determination of a deficiency. At the hearing herein or on brief, petitioners' counsel waived all the alleged errors except one which is stated in the petition as follows: "4. (a) The Commissioner erred in reducing the loss on rent from $615 to $195.51." In the income tax return and the amended return filed on behalf of decedent by her personal representative for the period in question, a deduction was taken as "loss from business or profession" in the sum of $615. In Schedule D of the return explaining this deduction there appeared after item 16 ("rent, repairs and other expenses") under the column headed "other business deductions" the figure $615, and after item 18 ("total deductions") the same figure. *448 At the hearing and on brief the issue was treated as being whether decedent, during the taxable period, sustained a loss in the sum of $615 from her business.

Findings of Fact

Elizabeth Dugan died on March 13, 1939. Her income tax return for the period January 1, to March 13, 1939, was filed with the collector for the third district of New York, by her executor Albert W. Dugan, and an amended return for the same period was filed by Roy A. Dugan, Administrator, with the will annexed.

Decedent, at the time of her death, was the proprietress of a store located at 109 W. 47th Street, New York City, and known as Dugan's Vanity Fair Costume Company. This store was in premises leased by decedent from the Wardben Realty Company. She had owned and operated this store from 1918 to the time of her death. For some years it was located at 161 W. 47th Street, then, for some years, at 123 W. 47th Street, and for three to five years before her death at 109 W. 47th Street. The annual rental which decedent was obligated to pay for the premises at 109 W. 47th Street was the sum of $2,160.

The business which decedent carried on at this store was the sale of costumes to actors in vaudeville and on*449 the legitimate stage. This business steadily declined from 1931 because of the decline in the number of vaudeville shows and stage presentations, and this process of declination was accelerated by the illness of decedent, the operator of the business, which began about eighteen months before her death.

During the period January 1, 1939 to March 13, 1939, inclusive, merchandise was sold by or on behalf of decedent at her store for the gross amount of $500. This merchandise was sold as a part of the process of disposing of the store, and at a price less than its cost. During this period the expenses incident to the operation of the store were as follows:

Opinion

KERN, Judge: The pleadings in the instant case and the proof offered by petitioners are not wholly satisfactory. However, after a careful study of the record we are of the opinion that on the one issue which remains for our consideration the petitioners have established that decedent sustained a business loss during the taxable period in at least the sum of $615. Therefore, we decide this issue in favor of petitioners.

Decision *450 will be entered under Rule 50.