
    NICHOLS v. STATE TAX COMMISSION
    Thomas J. Lekas, Portland, submitted a brief for plaintiff.
    Carlisle B. Roberts, Assistant Attorney General, Salem, submitted a brief for defendant.
    Decision for plaintiff rendered January 25, 1965.
   Edward H. Howell, Judge (Pro Tempore).

This is a suit to set aside State Tax Commission’s Opinion and Order No. 1-64-14, which affirmed defendant’s deficiency assessment against plaintiffs for additional income tax for the year 1961. The case is before the court on demurrer and a decision on the demurrer will be decisive.

Plaintiffs realized gains from the sale of corporate stock on July 31, 1961. These gains were used to pay for the construction of a fixed, permanent swimming pool on their personal residence tract. The plaintiffs sought special capital gains treatment for income tax purposes of the gains expended, on grounds that this was an investment in real property that qualified for the treatment under ORS 316.420(l)(a). The State Tax Commission denied the special treatment on the grounds that a purchase of a personal residence is not a qualifying investment in real property under ORS 316.420(1)(a).

This court has held in two prior cases that an investment in a personal residence is an investment in real property that qualifies under ORS 316.420(1) (a) and is therefore entitled to the special capital gains treatment. See Christianson v. Commission, 2 OTR 43 (1964); reversed 240 Or 504, 402 P2d 743 (1965) and Jayne v. Commission, 2 OTR 65 (1965). Therefore, it is the court’s decision that defendant’s additional assessment will be set aside.

Plaintiff shall prepare a form of decree setting aside defendant’s assessment, without costs to either party.  