Bessie Stanley, Estate of Joseph Stanley, Deceased, Bessie Stanley, Etc. v. Commissioner of Internal Revenue

Petitioner, Bessie Stanley, seeks review of a decision of the Tax Court which is reported at 40 T.C. 851 (1963). We conclude that the decision of the Tax Court was correct.

The facts are stipulated. Joseph and Bessie Stanley were husband and wife, and all of their property was community property under the laws of the State of California. Joseph died on November 15, 1958. Before his death he and Bessie made three sales of property, one in 1952 and two in 1954. Each was of a linen supply business and of real and personal property. The sale price in each case was payable in installments. For federal income tax purposes the Stanleys elected to return the gains from each of these sales on the installment basis, as permitted by section 44 of the Internal Revenue Code of 1939 and section 453 of the Internal Revenue Code of 1954. Under these sections, an aliquot portion of each installment received is treated as the receipt of a fraction of the total capital gain involved in the sale.

The installment obligations resulting from these sales were also community property in which Joseph and Bessie each had a one-half interest. Joseph’s interest was included in his gross estate for federal…