Commissioner of Internal Revenue, Petitioner, v. Hulet P. Smith and Loma M. Smith, Respondents, 397 F.2d 804 (9th Cir. 1968)

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U.S. Court of Appeals for the Ninth Circuit - 397 F.2d 804 (9th Cir. 1968) July 5, 1968

Edward Lee Rogers (argued), Lee A. Jackson, Thomas Silk, Attys., Dept. of Justice, Mitchell Rogovin, Asst. Atty. Gen., Tax Div., Dept. of Justice, Lester R. Uretz, Chief Counsel, Internal Revenue Service, Washington, D. C., for petitioner.

Dana C. Smith (argued), Pasadena, Cal., for respondents.

Before CHAMBERS and ELY, Circuit Judges, and BYRNE, District Judge.


The taxpayers, husband and wife, owned a home in Arcadia, California. They acquired a new home a few hundred miles away and moved to it, never intending again to use the Arcadia property as a residence. It was put up for sale, and the Tax Court found that the taxpayers, during the period of time from when they vacated the home until its eventual sale, held it "for the production of income" within the meaning of sections 167(a) (2) and 212(2) of the Internal Revenue Code of 1954. Upon the basis of this finding, it was held that the taxpayers properly deducted maintenance expense, as well as depreciation, for that period. See Mitchell v. Commissioner, 47 T.C. 120 (1966), acq., 1967-1 Cum.Bull. 2.

The Government makes a strong case for reversal. See Recent Developments, Hulet P. Smith, 66 Mich. L. Rev. 562 (1968). Unusual circumstances are present, however, and we are not persuaded that the Tax Court's factual finding and its consequent conclusions are clearly wrong.