SHARP V. UNITED STATES 199 F.Supp. 743, affirmed 303 F.2d 783 (3rd Cir. 1962) CASE BRIEF

SHARP V. UNITED STATES

199 F.Supp. 743, affirmed 303 F.2d 783 (3rd Cir. 1962)

NATURE OF THE CASE: This was a ruling on cross motions for summary judgment under Rule 56. Sharp (P) and the United States (D) filed cross-motions for summary judgment in P's action to recover alleged overpayments of federal income taxes.

FACTS: Hugh Sharp (P) and Bayard Sharp (P1) were equal partners in a partnership that purchased a Beechcraft airplane at a cost of $45,875. From 1948 to 1953 additional capital expenditures were made with respect to the airplane that cost $8,398.50. Title was held by the partnership. During the ownership period the partnership used the plane 73.654% of the time for personal use and 26.346% of the time for business usage. The partnership was only allowed $14,298.90 depreciation of the total airplane cost; that was 26.346% of the total cost of $54,273.50. The plane was sold for $35,380 in 1954. The issue under dispute was the amount of the gain or loss realized on the sale of the airplane. Ps contend that they suffered a loss and certainly realized no gain on the sale. As they only depreciated $13,777.92 their adjusted basis was $40,495.58. Ps contend they lost $5,115.58 on the sale of the plane on its adjusted basis. Ps did not seek to deduct any part of the loss; their only claim on appeal is that there was no gain realized. The IRS contends that the business and personal allocation should be continued to determine a gain or loss on the sale with an adjusted business basis of $520.98 after subtracting depreciation. The IRS then allocated the $35,380 sale proceeds between business and personal and after getting $9,321.21 for business and $26,058.79 for personal use with the $520.98 subtracted from the business for a realized gain of $8,800.23 with that gain split in half between each taxpayer.

ISSUE:

RULE OF LAW:

HOLDING AND DECISION:

LEGAL ANALYSIS:

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