Grace Kern v. Ralph C. Granquist, District Director of Internal Revenue of the United States for the District of Oregon

291 F.2d 29 61-1 USTC P 9480 Grace KERN, Appellant, v. Ralph C. GRANQUIST, District Director of Internal Revenue of the United States for the District of Oregon, Appellee. No. 17159. United States Court of Appeals Ninth Circuit. May 31, 1961. Carl E. Davidson and Charles P. Duffy, Portland, Or., for appellant. Louis F. Oberdorfer, Asst. U.S. Atty. Gen., Lee A. Jackson, Harry Baum, Michael I. Smith, and Carolyn Just, Attys., Dept. of Justice, Washington, D.C., and C. E. Luckey, U.S. Atty., and Edward J. Georgeff, Asst. U.S. Atty., Portland, Or., for appellee. Before BARNES, HAMLIN and MERRILL, Circuit Judges. BARNES, Circuit Judge. 1 This is an appeal from a judgment of the United States District Court for the District of Oregon, refusing to grant taxpayer an income tax refund for the year 1953. Jurisdiction below rested on 28 U.S.C. 1346. This court has jurisdiction on the appeal. 28 U.S.C. 1291. 2 The sole issue before us is the amount of gain realized by appellant upon the sale of her residence on July 27, 1953, for the sum of $325,000. She entered into a written cost-plus contract to construct a new residence on April 1, 1954. The eighteen months period which is here of…

This is an appeal from a judgment of the United States District Court for the District of Oregon, refusing to grant taxpayer an income tax refund for the year 1953. Jurisdiction below rested on 28 U.S.C. § 1346 . This court has jurisdiction on the appeal. 28 U.S.C. § 1291 .

The sole issue before us is the amount of gain realized by appellant upon the sale of her residence on July 27, 1953, for the sum of $325,000. She entered into a written cost-plus contract to construct a new residence on April 1, 1954. The eighteen months period which is here of importance expired January 27, 1955. Appellant “used” her new residence prior to that date, but only $131,-099.31 worth of work was performed to and including that date, while $149,-742.46 was the cost of work performed after that date, out of the total cost of $280,841.77.

In appellant’s original 1953 income tax return, she had estimated the probable cost of her new house at $115,000, and paid the tax on a taxable gain of $209,-567.50. In her amended income tax return for 1953, she used the actual construction cost figure hereinabove mentioned, computed her taxable gain at $43,725.73, and sued for the alleged overpayment of taxes in…

(dissenting).

I respectfully dissent. While my brothers agree that the result to the taxpayer is “an example of inequities” in income tax laws, they do not feel able to reverse the case. The statute and the regulations all use the word “made” as the critical word. In the context in which this word is used, it is ambiguous.

In this case the taxpayer had, within the time permitted by the statute, executed a contract to erect a new residence according to plans and specifications at a price of cost plus ten percent. She had incurred an obligation to pay this sum and was legally liable therefor. She had done all that she could to make a completed transaction. The contract provided that the construction be completed wit.hin the allowable statutory period. She had moved into the new residence within the allowable statutory period. However, through no fault of hers and solely because the contractor and subcontractor could not obtain and install the required interior woodwork on time, the job was not finished until after the 18 months period.

To reach their conclusion my brothers add words to the statute by construing the ambiguous word “made” to mean “had constructed and used.”

In…