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William C. Horrmann v. Commissioner

Citation. 17 T.C. 903, 1951 U.S. Tax Ct.
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Brief Fact Summary.

Petitioner inherited a house from his mother. He redecorated the house and made it his residence for two years. After he moved out, the attempted to rent the property unsuccessfully and eventually sold it.

Synopsis of Rule of Law.

A deduction for a long term capital loss must be from a transaction entered into for profit.


Petitioner acquired a residence and garage from a devise from his mother. He redecorated and used the property as his residence for while but soon abandoned it. He made efforts to rent the property and to sell it. It eventually sold for $45,000. When he first obtained the property it was valued at $60,000.


Is Petitioner entitled to a depreciation deduction?
Is Petitioner entitled to a deduction for expenses for maintaining and conserving the property?

Whether Petitioner is entitled to a deduction for a long term capital loss arising from the sale of the property?


Judge Black issued the opinion for the Tax Court in holding that Petitioner is entitled to depreciation deductions.
The Tax Court found that Petitioner was holding the property for production of income and deduction for maintenance expenses is allowed.

The Tax Court found that the Petitioner is not entitled to a long term capital loss deduction because there was no conversion of the property to a transaction for profit.


The Tax Court found that for issued one and two the deductions were allowed as Petitioner demonstrated that he had expended efforts in trying to rent and sell the property. As far as the long term capital loss, that required the Petitioner to show that the property was converted into a transaction for profit. However, after he acquired the property he converted the place into his personal residence. Simply trying to rent or sell the property does not change its character. Rather, Petitioner could have changed his mind at any moment subject to his will.

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