- 8 -
we have jurisdiction over petitioners' 1993 tax year, we shall
address petitioners' entitlement to a loss deduction in 1993. Sec.
6214.
Under section 165(a), taxpayers generally are entitled to
deduct losses not otherwise compensated for by insurance or
otherwise. Section 165(c) limits the deductions of noncorporate
taxpayers to losses incurred in a trade or business activity, a
for-profit activity, or casualty and theft losses.
To decide whether a taxpayer is entitled to a loss as the
result of a sale which is a part of a trade or business or for-
profit activity, we must first determine whether a sale is deemed
to have occurred. "The term 'sale' is given its ordinary meaning
for Federal income tax purposes and is generally defined as a
transfer of property for money or a promise to pay money." Grodt
& McKay Realty, Inc. v. Commissioner, 77 T.C. 1221, 1237 (1981)
(quoting Commissioner v. Brown, 380 U.S. 563, 570-571 (1965)).
Whether a sale has occurred depends on the facts and circumstances.
Haggard v. Commissioner, 24 T.C. 1124, 1129 (1955), affd. 241 F.2d
288 (9th Cir. 1956). The relevant factors to be considered include
whether legal title passes; how the parties treat the transaction;
and whether an equity was acquired in the property. See Grodt &
McKay Realty, Inc. v. Commissioner, supra.
At trial, Mr. Rungrangsi testified that he sold Stanton
Mexicatessen to Ms. Eagatatt on September 15, 1993, apparently in
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011