explaining that facts and circumstances dictate whether a former residence used for personal purposes has been converted in the hands of the same taxpayer into property held for the production of income
How later courts described this case
- explaining that facts and circumstances dictate whether a former residence used for personal purposes has been converted in the hands of the same taxpayer into property held for the production of income
- an expense deduction is justified under section 212(2) only if the property to which it relates "is 'held for investment,' i.e., for the production of income"
Written by the judges who cited it.
The opinion
FoRrester, /., concurring: I think that the majority has reached the correct result and that that result is entirely supported by the ultimate finding “it is clear that [petitioners] were not seeking to realize on possible post-conversion appreciation in value.” (Emphasis supplied.)
The time when the conversion occurred is obviously the key, and any appreciation prior thereto would not have grown while the property was being “held for investment,” (sec. 1.212-1 (b), Income Tax Kegs.) but while the property was being held as taxpayers’ personal residence.
The foregoing raises the question, Appreciation over what basis? I believe that the only sensible answer is appreciation over the fair market value of the property at the time of conversion, for otherwise the owner of a residence which had declined in value during his occupancy would be precluded from any tax benefits in attempting to minimize his loss even though it were quite apparent that the property would appreciate in value after he had abandoned it as a residence unless he could also prove that he reasonably expected the appreciation to carry through his original tax base.
By way of dictum the majority seems to require just such excessive (for want of a better term) postconversion appreciation and I think that this dictum is wrong.
HreNNEN and Raum, //., agree with this concurring opinion.