*4274 The sale price of the property sold by the petitioners under the evidence submitted being greater than the proven cost thereof prior to March 1, 1913, and less than the stipulated March 1, 1913, value, the respondent was correct in disallowing the loss claimed as a result of that sale.
*1189 This is a proceeding for the redetermination of deficiencies in income taxes amounting to $593.92 and $602.42 asserted against H. B. and W. G. Pence, respectively, for the year 1920, and the same amount against each of their wives.
Since the income in controversy was derived from a copartnership of which H. B. and W. G. Pence are members, these cases were consolidated for hearing and for joint consideration.
The sole question for determination is whether the respondent committed an error in disallowing as a deduction an alleged loss upon the sale of property by the partnership.
FINDINGS OF FACT.
H. B., and W. G. Pence are members of the copartnership of Pence Brothers, and they reside at Payette, Idaho.
They owned, in addition to other lands, a*4275 certain parcel of land known as the "Pence Home Ranch." The majority of the Home Ranch was acquired by them as a gift from their father in 1901 or 1902, and the remainder by desert claims and purchases and under the homestead entry laws.
Between the date of acquisition and March 1, 1913, the following expenditures were made in the improvement of the Pence Home Ranch, aggregating in amount, $71,530:
| Clearing sage brush off, etc., for farming purposes | $7,940 |
| Leveling land | 5,800 |
| Fencing | 6,210 |
| Constructing and building irrigation ditches from Payette reservoir | 15,100 |
| Installing pumping equipment and buildings for same | 12,450 |
| Constructing syphon | 8,740 |
| Constructing flumes where syphons not practical | 2,360 |
| Purchase of rights of way | 2,150 |
| Bulding barns and sheds, etc | 6,850 |
| Riprapping banks of creek | 2,450 |
| Water rights and water filing expense | 1,480 |
*1190 The stipulated fair market value of the Home Ranch at March 1, 1913, was $100,000.
The Home Ranch was sold in 1920 for $81,008.
The partnership claimed a loss of $33,463.16 in the year 1920 as a result of this sale. The respondent held that no gain or loss could be recognized since the*4276 property in question was sold for more than cost but at less than its fair market value at March 1, 1913. The respondent held that the income from the partnership constituted community income.
OPINION.
MORRIS: The only question involved in this proceeding is the cost of the Pence Home Ranch, sold by the petitioners in 1920, on which an alleged loss of $33,463.16 was sustained. The petitioners contend that the property in question was sold for less than cost.
There is in petitioners' brief an amount of $38,800 which appears to be the cost attached to the property in question by the revenue agent. The petitioners state in their brief that this amount was "conceded by the revenue agent as being a fair value, which value is acceptable to all parties, and upon which there has been no controversy." We find nothing in the record tending to establish the acceptability of this figure as the "fair value" of the land at the time it was deeded to H. B. and W. G. Pence, nor do we agree with the statement that there has been no controversy over this figure. Indeed, since the March 1, 1913, value was stipulated by the parties and since the parties were apparently in agreement with respect*4277 to the selling price, the entire controversy hinged upon the cost of this property to the petitioners. If the petitioners intended to rely upon the fair market value as an element entering into the cost of this property, which they no doubt did, that value should have been established in the same manner as the improvements on the property. We have no definite knowledge of the respondent's treatment of this figure, nor do we know whether he regarded this sum to be the fair market value at the time the property was acquired by the petitioners or whether he regarded it to be the cost to the petitioners of everything including the improvements herein established. It must be obvious, therefore, that the proof of this sum as fair market value was one of the important elements of cost. Not being evidence before this Board, we can not of course give any weight to the affidavits which are appended to the petitions, nor to the statements in the petitioners' brief. .
On the evidence offered we are able to find that the petitioners had expended $71,530 in improving the property in question prior to March 1, 1913. *4278 The March 1, 1913, value was stipulated by the *1191 parties to be $100,000 and the sale price, to which the parties agree, was $81,008; hence it will be seen that the sale price is less than the March 1, 1913, value and greater than the cost as proven by the petitioners. Therefore, on the evidence offered we sustain the findings of the respondent.
Judgment will be entered for the respondent.