FERRER V. CIR (TAX)

The Tax Court held that the sale of the bakery did not constitute a sale of a single asset but of individual assets, some of which were capital assets while other were ordinary assets. But since petitioner failed to show what portion of the selling price of the bakery was fairly attributable to each asset, the Tax Court held that it could not ascertain the capital and/or ordinary gains taxes properly payable upon he sale of the business. For this reason, it denied petitioner's claim for refund.

We agree with the contention of the respondent that the matter of computation of profit cannot be taken up in this appeal because the same was neither raised in the Tax Court nor made within the issues of the pleadings of the parties. There, the only issues were whether the Tax Court had jurisdiction over the case and whether or not the sale of the bakery was a sale of capital asset or of individual assets comprising the business.

The rule is well settled that no question will be considered by the appellate court which has not been raised in the court below. When a party deliberately adopts a certain theory, and the case is tried and decided upon the theory in the court below, he will not be permitted to change his theory on appeal, cause to permit him to do so would be unfair to the adverse party.

The issue then is whether or not the sale of the La Suiza Bakery was a sale of a capital asset so that the profits derived from the sale is taxable up to 50 percent only, considering that petitioner owned it for more than 12 months, or whether the business is to be comminuted into its component parts, each part to be tested against the definition of capital assets in the Tax Code.

In the face of the language of the law, although it may be true that a stock in trade taken by itself should be treated as a universitas facti, by no possibility can a whole business be so treated and the same is true as to any property within the other exceptions. Congress plainly did not mean to comminute the elements of a business, plainly, it did not regard the whole as capital assets.

In this with this, we hold that the sale of the bakery was a sale not of a single asset but of individual assets that made up the business. And since the petitioner failed to point out what part of the price he had received could be fairly attributed to each asset, the Tax Court correctly denied his claim.