LOWRY V. UNITED STATES
384 F.Supp. 257 (1974)
NATURE OF THE CASE: This was a dispute over what it takes to convert property to income
producing status. Lowry (P) brought an action to recover federal income taxes and interest,
collected by the IRS (D) when they disallowed a deduction for maintenance of income
producing property.
FACTS: P owned property at Martha's Vineyard which he used as a summer residence for a
number of years. P then ceased to use the property as a summer residence in 1967 and
immediately offered it for sale without attempting to rent the property. The property was
part of Seven Gates Farm Corporation and legal title to the property was held by the
corporation of which P owned 3%. The leasing arrangement that P had acquired by devise from
his father treated P as the defacto owner of the property. No stockholder-lessee could sell
his stock and lease without prior consent of 75% of the stockholder-lessees. Also rentals of
a year or less required the prior consent of the Committee on Admissions and a lease for
more than one year required 75% stockholder-lessee approval. When P decided to sell he put a
price of $150,000 on the property which was substantially higher than current market values
but P believed that the house would appreciate in value and that eventually he would get his
price. After it was put on the market the summer home was never again used as a residential
property. P did go each spring to get the house ready for showing and closed the house each
fall but each of those trips only lasted 2-3 days. P made no attempt to rent the house. An
offer was made in 1968 but 75% approval could not be obtained. Eventually the house was sold
in 1973 and P then showed a long term capital gain of $100,536.50 as a result of the sale.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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