McLean Trust v. Commissioner

Memorandum Opinion

STERNHAGEN, Judge: The taxpayer assails a deficiency of $49,054.84 in income tax for 1941 determined by the Commissioner as a result of increasing the gain derived by the taxpayer in the sale of real property in December, 1941. The fair market value of the property on June 9, 1916, is the only question in the case. I.R.C., Sec. 113(a)(5).

John R. McLean died testate June 9, 1916, a resident of the District of Columbia. To the petitioner in trust he left a tract of 76.95 acres and improvements in Washington known as Friendship, which he had purchased in 1898 and 1899 at a cost of $276,170 and used thereafter as a residence. The petitioner sold the property on December 31, 1941, to the United States Defense Housing Corporation for $1,000,000, and paid $60,946.30 broker's commissions and other costs of sale. On its income tax return for 1941 filed in Baltimore, Maryland, the petitioner reported a net gain of $119,053.70 from the sale, based upon a fair market value of the property on June 9, 1916, of $820,000. Fifty per cent of*210 this gain was taxable. The Commissioner determined that the fair market value of the property on June 9, 1916, was $492,987 and redetermined the taxable long-term capital gain accordingly to be $223,033.35.

From the evidence it is hereby found as a fact that the fair market value of the property in question on June 9, 1916, was $820,000.

Decision will be entered under Rule 50.