Valley Title Company v. Commissioner of Internal Revenue

This appeal is taken from the decision of the tax court, 34 T.C.M. (CCH) 312 (1975), upholding the Commissioner in his disallowance of a loss claimed by taxpayer, Valley Title Company. Whether a loss was sustained is the question before us. Taxpayer claimed a loss in connection with an exchange by taxpayer of an unimproved parcel of land owned by it, located on Second Street, San Jose, California, for an improved parcel of land located on First Street, San Jose. The First Street property was originally owned entirely by Broadway-Hale Stores, Inc. In 1958, Broadway-Hale sold approximately 85 percent of the First Street property to 58 Parcal Corporation. Included in the portion sold to 58 Parcal Corporation was the four story brick building located on the property. The 58 Parcal Corporation is unrelated to Broadway-Hale and the Commissioner has not contended that any of the transactions involving these two corporations was less than arms length.

Taxpayer’s basis in the Second Street property at the time of the exchange was $383,185.78. This property, plus cash in the sum of $925,000, was exchanged for the First Street property. In the escrow agreement the total sales price of the…