Saturday, May 4, 2013

Sharp v. United States case brief

Sharp v. United States case brief
199 F. Supp. 743, 1961 U.S. Dist. 61-2 U.S. Tax Cas. (CCH) P9774; 8 A.F.T.R.2d (RIA) 5812

CASE SYNOPSIS: Plaintiff taxpayers and defendant United States of America (government) filed cross-motions for summary judgment in the taxpayers' action to recover alleged overpayments of federal income taxes.

FACTS: The taxpayers were equal partners in a partnership that purchased an airplane used for both personal and business purposes. After the airplane was sold, the taxpayers claimed a loss on the sale. The Internal Revenue Service (IRS) concluded that the taxpayers realized a gain on the sale under Rev. Rul. 286, 1953-2 C.B. 20 (revenue ruling), which, in determining the gain or loss on a sale, required an allocation of the amounts representing cost, selling price, depreciation, and selling expenses to the personal and business portions of property in the same manner as if there were two transactions. The taxpayers filed an action to recover alleged overpayments of their taxes. The court granted summary judgment in favor of the government. The court held that allocation of the proceeds from the sale of the airplane in accordance with its percentages of business and personal use was practical and fair and that the revenue ruling was a reasonable exercise by the Commissioner of the IRS of his rule making power. The court also held that the ruling promoted the purpose of giving a uniform application to a nationwide scheme of taxation.

CONCLUSION: The court denied the taxpayers' motion for summary judgment, granted the government's motion for summary judgment, and dismissed the taxpayers' action to recover alleged overpayments of federal income taxes.

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