James G. Smyth, Collector of Internal Revenue v. George G. Cole and Myrtle N. Cole

Appellees are husband and wife whose only income was community income which was reported on a community and calendar year cash basis. The tax year here involved was 1944, and each taxpayer filed a separate return for that year.

Appellees owned two parcels of California land used for the purpose of growing oranges. On January 3, 1944, they conveyed both parcels (called orange groves) to their son. The consideration (stated in what appears to have been a separate “agreement”) was $25,000 for both “groves,” $12,500 being allocated to each. Possession passed to the son on this date. At the time of this sale, a crop of green Valencia oranges was growing on fruit trees. They were harvested in the following May and sold for $33,248.14.

The income taxes here in dispute were paid on April 23, 1948, and this appeal grew out of a suit resulting from a rejection by the Commissioner of claims for refund timely filed by each taxpayer. The lower court agreed with taxpayers in their suit for a refund of the taxes paid by each amounting to $2,758.78 with interest thereon amounting to $474.87, and entered judgment in favor of each. The taxes here specifically involved arose out of a deficiency…

(concurring).

I concur in Judge BONE’S opinion as I am agreed that the case is governed by the decision in Watson v. Commissioner, 345 U.S. 544 , 73 S.Ct. 848, 852 , 97 L.Ed. 1232 , of which the trial court did not have the benefit when he made his findings. I have but one reservation in this concurrence and that is based upon my belief that no court could reasonably say that the presence of the crop on January 3, 1944, did not add some value to the purchase price. The fact that this crop was more immature than that in the Watson case shows a difference in degree but not in kind. Its ultimate maturity is subject to more hazards but I think that, to paraphrase the language of the Supreme Court, “It is obvious that the parties to this sale did in fact attribute [some] value to the unmatured crop.” What that value was is manifestly not susceptible of exact proof; in the Watson case the Commissioner said $122,500 and the Tax Court said $40,000. Judge BONE’S opinion seems to emphasize the words “if any”. Like farmers generally, persons in the orchard business live perpetually with the chances of frost, pests and similar hazards, and know how to evaluate them. I cannot think that any…

(dissenting).

In substance and effect the trial court found that there was no basis in fact for ascribing any value to the growing oranges at the time the orchard was sold. This ought to be enough, unless we desire to have the court go through the idle ceremony of finding a nominal value. I would affirm for the reasons given in the opinion below, 96 F.Supp. 745 .

218 F.2d 667 55-1 USTC P 9177 James G. SMYTH, Collector of Internal Revenue, Appellant, v. George G. COLE and Myrtle N. Cole, Appellees. No. 13080. United States Court of Appeals, Ninth Circuit. Jan. 19, 1955. H. Brian Holland, Asst. Atty. Gen., Ellis N. Slack, Hilbert P. Zarky, George F. Lynch, Sp. Assts. to Atty. Gen., Lloyd H. Burke, U.S. Atty., San Francisco, Cal., for appellant. Clyde C. Sherwood, John V. Lewis, M. L. Lieberman, San Francisco, Cal., for appellees. Before HEALY, BONE and POPE, Circuit Judges. BONE, Circuit Judge. 1 Appellees are husband and wife whose only income was community income which was reported on a community and calendar year cash basis. The tax year here involved was 1944, and each taxpayer filed a separate return for that year. 2 Appellees owned two parcels of California land used for the purpose of growing oranges. On January 3, 1944, they conveyed both parcels (called orange groves) to their son. The consideration (stated in what appears to have been a separate 'agreement') was $25,000 for both 'groves,' $12,500 being allocated to each. Possession passed to the son on this date. At the time of this sale, a crop of green Valencia oranges was…