Particelli v. Commissioner of Internal Revenue. Particelli's Estate v. Commissioner of Internal Revenue

Petitioner Giulio Particelli, having been engaged in the business of operating a winery in the state of California for some years, decided to dispose of the winery business. Prior to making the decision to sell, petitioner had been ap proached by a buyer of wine, one John Dumbra, a representative of Tiara Products Company, Inc., hereafter Tiara, who made an offer to buy three or four cars of wine. Because of the then existing O.P.A. price ceilings no profit could be realized from the sale of the wine. Petitioner made a counter offer to sell the wine and winery for the sum of $350,-000. While Tiara had no particular desire to own or operate the winery, the demand for wine was so great and the ceiling price under which Tiara operated was such that it could afford to buy the winery in order to obtain the wine. After further negotiation the purchase price of $350,000 was agreed upon. A written contract of sale was executed wherein the sale price of the wine was fixed at $77,000 and the winery at $273,-000. The subsequent escrow instructions treated the transfer of the wine and the winery as two separate sales at the prices stated in the written contract. Both buyer and seller recorded…