Cramer v. Commissioner - 55 T.C. 1125 (1971)

Rule:

Section 164 allows a deduction for real property taxes; but they are, in general, "deductible only by the person upon whom they are imposed."

Facts:

Respondent Commissioner of Internal Revenue determined deficiencies in petitioner’s income tax for 1964, 1965, and 1966 in the amounts of $ 257.62, $ 561.21, and $ 594.22, respectively. Such deficiencies were based on: (i) dependency exemption issue, wherein petitioner claimed her son as a dependent during 1966; (ii) real property issues, wherein petitioner deducted real property taxes and repair expenditures from her income; (iii) automobile accident loss issue, wherein petitioner claimed a deduction for a casualty loss in the amount of $202.22; and (iv) theft loss issue, wherein petitioner claimed a deduction in the amount of $600 for stolen properties. Respondent Commissioner did not allow such deductions.

Issue:

Did the respondent commissioner correctly assess deficiencies in petitioner’s income tax?

Answer:

Yes, with respect to real property issues and automobile accident loss issue. No, with respect to dependency exemption issue and theft loss issue.

Conclusion:

The Court found that petitioner was entitled to claim dependency exemption deduction. According to the Court, in order to be entitled to a dependency exemption deduction, petitioner must show that she provided over half of her son’s support for the year 1966. In this case, the Court found that the stipulation and testimony established that petitioner incurred expenses exceeding the sum furnished for the son’s support by his father. The Court further found that petitioner was entitled to her claim of theft loss. Section 165(e) provided that a loss arising from theft shall be treated as sustained during the taxable year in which the taxpayer discovered such loss. In this case, the court held that no facts supported respondent’s contention that the loss was incurred in any other year aside from 1965. However, the court held that petitioner was not entitled to her claims on real property taxes and automobile accident loss. The Court noted that the property was owned by petitioner’s mother, and thus, would not fall within the ambit of Section 164. Moreover, petitioner’s expenditures in connection with the repossession and resale of one of her properties could not be deducted as they constituted amounts paid in connection with the reacquisition of property within the meaning of section 1038. Anent the automobile accident loss, the Court held that petitioner’s proof was not sufficient to show that she suffered a deductible loss from the accident.