Austin v. Commissioner

James Austin (plaintiff) was a director, an officer, and general counsel for the DeLaval Separator and Steam Turbine Companies (companies). Prior to 1949, the companies’ corporate offices were in New York City. During that time, Austin and his family lived in Connecticut, within commuting distance of New York City. In 1947, Austin was advised that the companies’ offices might relocate to Poughkeepsie, New York. Anticipating this move, Austin purchased a 220-acre property in Millbrook, New York, in August 1950 for $28,000. Austin thought this property was an excellent bargain from a profit standpoint. He immediately began making improvements totaling $44,250, and by November 1950, he sold his Connecticut home. In April 1951, the companies’ officers decided to keep their corporate offices in New York City. Nevertheless, Austin and his family moved to the Millbrook property the following month. Within a week, however, Austin had canceled all renovations and put the property up for sale. The family returned to Connecticut in August 1954. On March 18, 1955, Austin sold part of the Millbrook property for $31,500, sustaining a $30,000 loss based on a $61,500 adjusted basis. Austin deducted this loss on his 1955 federal tax return. The commissioner of the Internal Revenue Service (defendant) disallowed the deduction, asserting that Austin failed to meet § 165’s requirements. Austin petitioned the tax court for a redetermination.