Internal Revenue Service
Revenue Ruling

TaxLinks.com   sm

 Rev. Rul. 55-77

1955-1 C.B. 339

Sec. 1002

Full Text

Rev. Rul. 55-77

Taxpayer and 5 others, as tenants in common, owned undivided interests in real property, including a building. The taxpayer desired to purchase the undivided interest of one of the other tenants in common, but no price could be agreed upon. In accordance with state law, a partition action was filed, thus forcing a sale of the property. The taxpayer, together with 4 of the other tenants in common, purchased the property at the partition sale. The local commissioner, appointed by the court to make such partition in pursuance of his judgment, distributed the proceeds of the sale among all of the tenants in common in accordance with their respective undivided interests immediately prior to the partition sale. The commissioner conveyed the entire title to the property to the taxpayer and the 4 tenants in common who joined him in submitting the joint bid at the sale. Held , under these circumstances, the partition proceedings constituted a nontaxable transaction for Federal income tax purposes. The taxpayer neither realized a taxable gain nor sustained a deductible loss on the sale of the undivided interest in the property which he owned immediately prior to the partition proceedings. The taxpayer still owns the interest which he owned prior to the sale; hence, he sold nothing. The effect of the sale was to establish a price at which the taxpayer could purchase the undivided interest of one of the other tenants in common. Compare Mary L. Hunnicutt v. Commissioner , 10 B.T.A. 1004, acquiescence, C.B. VII-2, 19 (1928)