James G. Smyth, United States Collector of Internal Revenue v. John A. Sullivan, of the Estate of Emma L. Merritt, Deceased

The Collector appeals from a judgment of the District Court ordering that the Executor taxpayer be refunded income taxes in the sum of $10,287.52 plus $1,-388.82 interest which had been collected by the Collector, as due for the calendar year 1946. The District Court found that this sum was erroneously collected as taxes upon profits realized from the sale in 1946 of capital investments in two parcels of real property in San Francisco, California, one known as “553 Market” and the other as “Merrie Way”.

This property came under the executor taxpayer’s charge in November, 1938, when the appraised value of the estate was smaller than the estate’s lia bilities. The executor therefore determined to hold the property until a more advantageous sale was possible. He held the two parcels from 1938 until they were sold in 1946 for an amount exceeding the estate’s liabilities. We hold that the administration of the properties until their sale is a single integrated transaction. Cf. Sloane v. Commissioner of Internal Revenue, 6 Cir., 188 F.2d 254, 263 , 29 A.L.R.2d 580 .

The District Court, in determining the net income for 1946, allowed the addition of $7,990.41 of carrying charges to the…