Martha K. Butler Trust v. Commissioner of Taxation

Matson, Justice. Certiorari upon relation of the commissioner of taxation to review a decision of the state Board of Tax Appeals. In 1948 the taxpayer sold securities for $304,159.61. The cost basis of the securities under the Minnesota Income Tax Act was the value of the securities on January 1, 1933, which was $94,500. The cost basis for the Federal income tax was the value of the securities in the estate of the decedent who died September 22, 1926, which amounted to $46,200. The Minnesota long-term capital gain was $209,659.61 of which 50 percent was taxable. The Federal capital gain was $258,459.61 of which 50 percent was taxable. By reason of the difference in the respective cost bases, the taxpayer was required to pay a Federal tax on $24,400 more of capital gains income than he was required to pay under the Minnesota tax act. The Federal income tax on such larger capital gains income of $24,400 amounted to $11,427.18. The taxpayer paid the Federal tax in 1948 and then attempted to deduct the full amount thereof in his [457] 1948 state income tax return. The commissioner refused to allow the deduction of $11,427.18 on the ground that this portion of the Federal tax related to income not included in the measure of the tax imposed by the Minnesota tax act. The taxpayer appealed from the commissioner’s order of disallowance to the Minnesota Board of Tax Appeals, which reversed the commissioner’s order and allowed the deduction. This is a companion case to Bremer v. Commr. of Taxation, 246 Minn. 446, 75 N. W. (2d) 470, which opinion is filed herewith. All issues herein are resolved in the Bremer case, and for the reasons stated in that opinion, the decision of the state Board of Tax Appeals is affirmed. Affirmed.