Jayne M. Perkins v. United States

The United States has appealed from a judgment in favor of Jayne M. Perkins based on a decision of the district court holding that certain annuity payments made by Perkins constituted losses on a transaction for profit rather than capital expenditures and accordingly were deductible losses pursuant to 26 U.S.C. § 165 (c)(2) (1976). We reverse.

I. Factual Background

In late 1968, taxpayer Jayne M. Perkins, and her husband, Clinton, decided to form a corporation, Seattle Furniture Mart, Inc. (SFMI) for the purpose of owning and operating a building devoted to providing showroom space and market opportunities for furniture manufacturers and agents. In anticipation of the formation of the company, Clinton and his father, Raymond Perkins, who was then 80 years old, on December 10, 1963, executed an annuity agreement, which provided in part:

In January 1964, a certificate for 10,000 shares of $10.00 par value voting common stock was issued to Raymond for $100,-000.00 in cash. Raymond endorsed the certificate over to Clinton. Clinton and Jayne received the stock as their community property, and the annuity obligation was their community debt.

There was no express provision in the…