Salvatore v. Commissioner case brief

Salvatore v. Commissioner case brief

29 T.C.M. (CCH) 89 (1970)

CASE SYNOPSIS: Petitioner taxpayer sought review of a decision of respondent Commissioner of Internal Revenue (commissioner), who determined a deficiency in the taxpayer's income tax.

FACTS: The taxpayer had inherited a gas station from her husband upon his death. The taxpayer later contracted to sell the station to an oil company but gave a one-half interest in the property to her children before completing the sale. After paying off the liens on the property, the taxpayer received one-half of the profit from the sale and the children split the rest. The taxpayer reported a capital gain on her half of the profit and gifts made to each of her children. The commissioner determined that the entire amount from the sale was taxable to the taxpayer as long-term capital gain. The taxpayer sought review, and the court ruled in favor of the commissioner.

HOLDING:

The court held that although the children obviously had expected to receive a share of the property, they held no property interest in it when the taxpayer contracted to sell it to the company.

ANALYSIS:
The taxpayer's subsequent conveyance, unsupported by consideration, was merely an intermediate step in the transfer of legal title from the taxpayer to the company and whether the gift was completed prior to sale was immaterial. The substance of the transaction governed over the form.

CONCLUSION: The court ruled in favor of the commissioner in the taxpayer's action challenging the commissioner's determination of an income tax deficiency.

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