Pacific Homes, Inc., a Corporation v. United States

The sovereign is not to be frustrated in the replenishment of its fisc by the finespun arguments advanced by the appellant. When the taxpayer itself, in its income tax returns, has repeatedly described its business as that of renting and selling homes; when it has developed a crafty technique whereby it can quicken its sales; when, in three other tracts, not here in issue, the appellant sold all its houses; when its board of directors formally ratified its previous sales and authorized future ones; when, in sum, the appellant has generally sold houses whenever it had the chance to do so, this Court will not set aside a judgment based upon careful findings that the appellant held its houses primarily for sale in the ordinary course of its business, and that therefore the profits derived from such sales were taxable as ordinary income and not as capital gain.

I. Statement of Facts.

The appellant, a California corporation, was organized on August 9, 1941, to engage in developing real estate subdivisions and renting and selling houses primarily to defense workers. The authorized capital stock consisted of 50 shares. After May 10, 1945, Ross H. Chamberlain was the sole…

(concurring).

The burden of proof is on the taxpayer to show that the sales of its land in the three fiscal tax years ending May 31, 1947, were incidents of a business of renting houses and were not the sale of its capital assets.

In this situation we are required to eliminate viva voce testimony in. support of the taxpayer’s contention, since the District Court, hearing the witnesses, must be assumed to have disbelieved it.

With regard to the Homewood tract where the houses were first leased for 30 months with an option to purchase and then leased for a year without option, and on finding this was less profitable than to sell them, taxpayer sold the houses, there is no question that the court properly held that the taxpayer had not sustained its burden of proof.

The houses in the Southwood tract were leased for a period between a year and a half and two years and it then appearing that the leasing was less profitable, the houses were sold in the sixteen month period between April, 1945 and August, 1946. The burden of proof here is that the sales over the sixteen months were but an incident of liquidating the business of renting. Eliminating the oral testimony to that effect,…

230 F.2d 755 PACIFIC HOMES, Inc., a Corporation, Appellant, v. UNITED STATES of America, Appellee. No. 14732. United States Court of Appeals Ninth Circuit. February 21, 1956. L. W. Wrixon, Carl R. Schulz, San Francisco, Cal., for appellant. H. Brian Holland, Asst. Atty. Gen., Ellis N. Slack, C. Guy Tadlock, Sp. Assts. to Atty. Gen., Lloyd H. Burke, U. S. Atty., San Francisco, Cal., for appellee. Before DENMAN, Chief Judge, and LEMMON and CHAMBERS, Circuit Judges. LEMMON, Circuit Judge. 1 The sovereign is not to be frustrated in the replenishment of its fisc by the fine-spun arguments advanced by the appellant. When the taxpayer itself, in its income tax returns, has repeatedly described its business as that of renting and selling homes; when it has developed a crafty technique whereby it can quicken its sales; when, in three other tracts, not here in issue, the appellant sold all its houses; when its board of directors formally ratified its previous sales and authorized future ones; when, in sum, the appellant has generally sold houses whenever it had the chance to do so, this Court will not set aside a judgment based upon careful findings that the appellant held its houses…