E. J. Murray v. Commissioner of Internal Revenue

This is a petition to review a decision of the Tax Court which approved the Commissioner’s determination of a deficiency in income tax for the year 1947. The opinion of the Tax Court is reported at 21 T.C. 1049 where the facts of the case are stated at greater length and in more detail than we find necessary here.

In 1928 the petitioner and his wife acquired certain real estate in Klamath Falls, Oregon. They borrowed $64,000 from a savings and loan association which they used to finance the construction of a building upon the property and secured the loan by a mortgage thereon. In 1932, when there was a balance due of $57,000 upon the mortgage debt, petitioner and his wife conveyed the building, subject to the mortgage, to a corporation whose sole stockholders were Wiley and D’Albini, petitioner’s attorneys, and to the wives of Wiley and D’Albini. In 1934, the savings and loan association brought suit to foreclose its first mortgage and the property was sold pursuant to the foreclosure decree. On the last day of the statutory redemption period, the property was redeemed from the foreclosure sale by certain assignees of the Wiley D’Albini corporation. In 1948 the petitioner and…