William A. And Margaret K. Tombari v. Commissioner of Internal Revenue

William A. Tombari and wife on January 23, 1951, sold to Henry C. Lewis and wife the East Mission Pharmacy (hereinafter the Pharmacy) situate in Spokane, Washington, pursuant to the following agreement of purchase. Total purchase price $300,000.00, payable as follows:

Stipulated payments (a) through (d) of said agreement were performed in full during 1951 and the purchasers also made installment payments during that year amounting to $12,770.77. Petitioners (Tombari and wife) reported the sale of the Pharmacy on the installment basis pursuant to the provisions of § 44 of the Internal Revenue Code of 1939, 26 U.S. C.A. § 44. Commissioner challenged this. . Petitioners then reported as ordinary income the amounts they collected in excess of their basis (the fair market value) in the Arlington contract, but now claim this to have been in error. The Commissioner held that it was not. Tombari and wife then petitioned the Tax Court for a redetermination. The Tax Court sustained the Commissioner and we are asked to review the decision of that court.

The first issue for our consideration is whether the sale of the Pharmacy could properly be reported on the installment basis. The statute…