Frank C. Davis, Jr. And Frank C. Davis, Jr., of the Estate of Grace K. Davis v. Commissioner of Internal Revenue

DAVID A. NELSON, Circuit Judge.

On his federal income tax return for 1976, appellant Frank Davis deducted a loss allegedly realized on a mortgage foreclosure sale. The Commissioner disallowed the deduction on the basis of 26 U.S.C. § 707(b), which provides that no deduction shall be allowed in respect of losses from direct or indirect sales or exchanges of property between commonly controlled partnerships. The Tax Court upheld the disallowance, and Mr. Davis has appealed.

The evidence disclosed that a bank had foreclosed the mortgage it held on an apartment complex owned by a partnership of…