Court Opinion

ID: 4601766
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:28:18.0547+00
Date Added: 2024-06-11T07:52:33.207761
License: Public Domain

E. B. STEPHENSON, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.  CHARLES A. MCCLOUD, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.  W. M. LEONARD, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.  JENNIE FAULKNER AND B. J. FAULKNER, EXECUTORS, ESTATE OF ALBERT O. FAULKNER, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Stephenson v. CommissionerDocket Nos. 6195, 7357, 12684, 22744, 20405.United States Board of Tax Appeals13 B.T.A. 311; 1928 BTA LEXIS 3272; September 10, 1928, Promulgated *3272  1.  Deductions for alleged losses through joint investment disallowed.  2.  Loss sustained through compromise of a loan constitutes an allowable deduction for the taxable year in which final payment was made.  T. S. Allen, Esq., for the petitioners.  L. A. Luce, Esq., for the respondent.  LANSDON *311  In these proceedings, which were consolidated for trial, the petitioners seek redetermination of their income-tax liabilities for the years set forth below, for which respondent has asserted deficiencies as follows: PetitionerDocket No.YearDeficiencyE. B. Stephenson61951921$975.7119221,711.84Charles A. McCloud73571921853.781922575.94204051923841.49W. M. Leonard1268419214,384.40Albert O. Faulkner2274419222,017.33Petitioners allege error on the part of the respondent in disallowing deductions claimed by them on their respective income-tax returns for the years above shown for losses resulting from a joint purchase, made through a trustee, of certain securities and notes from the City National Bank of Lincoln, Nebr., for the purpose of relieving the bank of slow*3273  and questionable paper, and, as further claimed, for profit.  The losses claimed by petitioner Stephenson amounted to $35,000, and were apportioned equally between the years 1921 and 1922.  The loss claimed by petitioner McCloud through said investment amounted to $30,000, $15,000 of which was claimed as a deduction for the year 1921 and $15,000 for 1922.  The petitioner Leonard claimed a loss of $25,000 for the year 1921, and took a deduction for this amount on his return for that year, *312  but now claims that the same should be equally divided between the years 1921 and 1922 and requests that adjustments be made accordingly.  Petitioner Faulkner claimed a loss of $15,000 for the year 1922 and took deductions for same on his return for that year, but now requests that should it be determined that one-half of said amount was a loss during the year 1921, that adjustments be made accordingly.  In addition to the aforesaid, petitioner Faulkner alleged error on the part of respondent for the disallowance of a deduction claimed on a building owned by the taxpayer, but abandoned this claim at the hearing.  Petitioner McCloud claims further error committed by respondent*3274  in disallowance of a deduction, claimed by him in the sum of $2,687 for the year 1923, of loss sustained through a loan of $5,000 made by him in 1907 to M. C. Snyder & Sons.  With respect to the losses sustained by petitioners through their purchase of securities from the City National Bank, it is contended by respondent that, petitioners being stockholders in said bank, their investments constituted capital contributions or donations to the bank and therefore not items properly deductible from their respective incomes for the years claimed.  FINDINGS OF FACT.  The City National Bank of Lincoln, Nebr., is a national banking corporation which, prior to and during the taxable years involved, was engaged in a general banking business at Lincoln.  Its capital stock was held in various amounts by some 160 stockholders, including these petitioners, who were also members of its board of directors.  The shares of stock held by petitioners were in number and value as follows: NameNumber of sharesPar valueE. B. Stephenson35$3,500.00Charles A. McCloud12012,000.00W. M. Leonard22922,900.00Albert O. Faulkner12012,000.00More than 50 per cent*3275  of the capital stock of this bank was owned and controlled by L. B. Howey and L. J. Dunn, president and vice president, respectively, who between them had full management and control of its affairs, including all loans and discounts made and credits extended.  In the conduct of the business of this bank said Howey and Dunn exercised a free hand and made loans and extended credit without seeking advice, consent or approval of the *313  board of directors, concealing in some instances, by means of separate secret records, loans made and credit extended to certain favored customers.  Among the various customers of the bank favored by excessive loans and credit were the Hebb Motor Co., Patriot Motor Co., Nebraska Aircraft Corporation, Sheridan Park Investment Co., Standard Securities Corporation, Union Securities Co., Continental Mortgage & Land Co., Charles E. Draper, E. C. Hammond, A. G. Hebb, W. S. Jones, and L. A. Winship.  The Hebb Motor Co. was a corporation engaged in the manufacture and sale of motor trucks and motor bodies, and in the summer of 1920 had in its employ some 300 to 400 employees.  Its plant was located at Haverstock, a suburb of Lincoln, Nebr., and at such*3276  time it had assets of a reputed value of $3,000,000.  Its products were marketed in some 16 States and were sold principally upon a basis of one-third of the purchase price in cash and the balance in deferred installments represented by negotiable promissory notes.  The Patriot Motor Co. was a corporation affiliated with the Hebb Company and engaged in the manufacture and sale of commercial auto bodies and trucks.  The Nebraska Aircraft Corporation was a company engaged in the salvaging and rehabilitating of airplanes purchased from the United States Government and in the manufacture and sale of commercial aeroplanes.  The Sheridan Park Investment Co. was a real estate corporation engaged in the owning, holding, development and sale of real estate.  The Continental Mortgage & Land Co. was a corporation organized for the holding of Canadian lands.  The Standard Securities Co. was a corporation organized by the officials of the Hebb Motor Co. to serve as a medium through which to market the commercial paper of that corporation and to act as fiscal agent of it and affiliated concerns.  The Union Securities Co. was a subsidiary corporation to the Standard Securities Co.  These companies*3277  either secured direct loans from the City National Bank or discounted notes and other securities, taken in trade by them, to it, which in due course were rediscounted by the bank to the Federal Reserve Bank.  In this manner a continuous line of financial support was afforded them through the City National Bank.  The individual customers above mentioned were all stockholders and officials of the several companies referred to, and the loans made and credits extended to them were largely on account of said relationship and, in most cases, for the benefit of said concerns.  In addition to these commercial loans above mentioned, the City National Bank carried a large volume of agricultural and stock loans which taxed its available resources to the limit and could only be carried so long as the Federal Reserve Bank continued its policy *314  of accepting for rediscount the surplus loans made by it in excess of its available loan resources.  In the spring of 1920 the Federal Reserve Bank refused to accept further offerings made by the City National Bank of automobile paper for rediscount and returned all such notes submitted with the statement that the reasons for so refusing were*3278  due to the fact that this industry was absorbing more than its proportionate share of the lending resources available.  Increased penalties were also placed upon all renewals of stock and agricultural loans, which caused the turning back upon the City National Bank of a volume of these rejected loans in excess of its ability to carry and, at the same time, meet the calls of its local customers for funds to supply their current needs.  This forced the bank to discontinue all loans and further credits to these companies, which, being unable to procure finances for operations, were soon forced into liquidation.  The amount of excess loans carried by the bank in the fall of 1920 approximated the sum of $1,200,000, but the true total was known only to Howey and Dunn, who had concealed the facts from the other members of the board of directors.  The bank examiner discovered the true state of affairs early in 1920 and, from time to time, severely criticised the character of the paper held and admonished the directors to take steps to put the bank in a better condition.  In December, 1920, a receiver was appointed for the Hebb Motor Co., but it was believed by the officials of the City National*3279  Bank that this company had assets valued more than double its liabilities and that eventually it would be able to liquidate its entire indebtedness to the bank.  There were also debts owing the bank at this time by the Sheridan Park Investment Co., the Nebraska Aircraft Corporation, the Standard Securities Corporation and the Patriot Motor Co. in the aggregate of more than $450,000, and it was generally considered by the directors of the bank that a loss upon a considerable portion of this paper would be sustained.  Accordingly, it was agreed among the directors of the bank that a fund of $300,000 should be raised among themselves and placed in the hands of Stephenson to be used by him in taking up such paper from the bank as might thereafter be determined by a committee of directors as objectionable to the bank examiner.  The funds advanced by the various directors were to be considered as loans to the bank and each contributor was guaranteed against loss by Howey, assuming to act for the bank.  From the information then at hand, in so far as was made known to the directors, other than Howey and Dunn, the prospective losses would not run more than $300,000, and Howey and Dunn, president*3280  and vice president, respectively, conceding that their management of the bank was responsible for its present condition, agreed to assume all losses that might be sustained up to the sum of *315  $150,000 each, or a total of $300,000.  As evidence of this agreement a memorandum in writing was duly executed, under date of December 7, 1920, by said Howey and Dunn, and delivered to the directors of the bank, in which they agreed to take up as rapidly as possible such paper of these concerns as the committee should select as represented a loss until each, for himself, had taken up a total of $150,000, and 1,000 shares of the capital stock of the City Trust Co. of Lincoln, Nebr., were placed in the hands of Stephenson, trustee for the bank, by them to guarantee the performance of same.  Loans in the aggregate sum of $195,000 were then made by directors and placed in the hands of Stephenson, as trustee for the bank; also some $200,000 in new notes secured by chattel mortgage, were taken by said trustee from the Nebraska Aircraft Co., as additional security for its indebtedness to the bank, and other attempts were made to improve its condition.  The troubles of the bank, however, increased*3281  rather than diminished and it soon developed that the volume of bad or "slow" paper held by it was greatly in excess of the amount theretofore made known to the board of directors.  In January the bank examiner, immediately following his regular examination, advised Maly, the newly elected vice president, that the affairs of the bank were in bad shape, and that he had better get in there and help straighten them up.  Many conferences followed, and on April 22, 1921, a meeting of the board of directors of the bank was held, at which a resolution was adopted which provided that the members of the board of directors should execute their notes, or pay in cash, the additional sum of $200,000 "to take out all slow or doubtful paper * * * making a total of $395,000.00 contributed by the Board of Directors." On the same date a meeting of some of the directors was held in the office of Stephenson, in the Security Mutual Building, at which McCloud, one of the directors, suggested "that perhaps the best way to get rid of the examinations or examiner is to make a big hole in the stuff and take it out of the bank." It was then made known to those directors present that advances, or loans in the*3282  aggregate sum of $195,000 had already been made by some of the directors to the bank and that this fund had been placed in the hands of Stephenson, as trustee, for such purpose.  It being then considered that slow and doubtful paper, or "frozen assets" as termed by some, in the aggregate sum of $748,000 at least should be taken from the bank, it was proposed that additional funds be raised by voluntary contributions from such directors as desired to contribute, in such an amount that when added to the $195,000 theretofore loaned to the bank by the directors, and the $300,000 liabilities assumed by Howey and Dunn, would provide the funds necessary for such purpose.  This proposal finding favor, it was thereupon agreed that such contributions be pooled and be placed in the hands of *316  Stephenson, as trustee, with authority to purchase from the bank, out of said funds, such slow or doubtful paper as the committee theretofore appointed for such purpose might from time to time select for withdrawal, and to hold such paper or credits so purchased and collect the same for the benefit and use of the contributing members of said pool.  It was also agreed that the loans theretofore*3283  made to the bank by the directors in the sum of $195,000 be considered as contributions to this pool and that each member be permitted to share in the funds derived from collections made of the securities thus purchased, pro rata, as determined by the amount of his contribution.  On the same date (April 22d) a proposal was made by Howey and Dunn to the board of directors of the bank that they each, in furtherance of said scheme, would amend their former agreement of December 7, 1920, wherein they had assumed liabilities for losses of the bank to the amount of $300,000, by increasing the same by $25,000 each, provided that they be permitted to share, to the extent of such increased liabilities, with the other directors in the distributions of any funds that might be derived from the assets of the pool.  Amendments in writing to said former agreement, showing said increased liabilities, were duly executed by said Howey and Dunn and delivered to the chairman of said board on May 3, 1921.  No written agreement of any kind was entered into between the members of this pool, excepting a consent for preference which was given by the other members to directors Maly, Barkley and Carlsen, wherein*3284  it was agreed in consideration of the contributions of said latter members that they be made "preferred creditors" to the extent of the amounts contributed by them and that the same be repaid to them out of the first monies derived from any of the assets of the pool.  Payments were made of the contributions to the pool on or about May 1, 1921, and credits made by the trustee to the various members, including those for previous loans to the bank, show the following: A. H. Armstrong$25,000W. E. Barkley25,000C. C. Carlsen25,000A. O. Faulkner15,000W. H. Ferguson60,000Henry Gund30,000E. C. Hardy10,000Paul H. Holm40,000W. M. Leonard$25,000Stanley Maly25,000C. A. McCloud30,000E. B. Stephenson35,000J. M. Stewart20,000E. B. Stephenson Trustee?  "Sloan"33,000398,000On May 15th, following, a special meeting of the board of directors of the City National Bank was held, which considered, among other things, the proposal of the directors to purchase the securities herein considered.  At this meeting a resolution was proposed and adopted, which provided in part as follows: *317  WHEREAS, the individual members of*3285  the Directorate of the City National Bank, of Lincoln, Nebraska, will purchase unconditionally, with recourse on the bank, notes or receivables of the bank in the aggregate sum of One Million ($1,000,000.00) Dollars; BE IT THEREFORE RESOLVED that the officers of the City National Bank, of Lincoln, Nebraska, be, and are hereby authorized to sell and assign to said Directors, notes or receivables of this bank in the aggregate sum of One Million ($1,000,000.00) Dollars, to be selected by a Committee representing the individual members of the Directorate, said notes or receivables to bear the endorsement of the said City National Bank.  Delivery of such notes may be made from time to time, as is deemed by the Committee to serve the best interests of the bank.  BE IT FURTHER RESOLVED that the officers of the City National Bank, of Lincoln, Nebraska, be, and are hereby empowered to place in the hands of a Trustee agreed upon to represent the Directors, additional notes and receivables as collateral to the endorsement of this bank on notes sold to said Directors, in such amounts as may be deemed advisable by the Committee; * * * To relieve the distressed condition of the bank there*3286  was paid into it, during 1921, in money and property equivalent, the following amounts: By L. J. Dunn, under contracts, Dec. 7, 1920, and May 3, 1921$280,000.00By L. B. Howey, under contracts, Dec. 7, 1920, and May 3, 1921179,350.00By loans from directors prior to April 22, 1921195,000.00From directors, paid after April 22, 1921203,000.00Total857,350.00Securities and slow paper were removed from the bank during this period of a total, face value, of $748,000, of which accounts, etc., were transferred to the pool as follows: Continental Mortgage & Land Co$11,104.15Chas. E. Draper200.00E. C. Hammond20,000.00A. G. Hebb45,000.00Hebb Motors Co74,500.00Patriot Motor Co20,000.00W. S. Jones17,000.00NebraskaAircraft Corporation120,000.00Sheridan Park Investment Co80,000.00Standard Securities Corporation$82,572.75Union Securities Co17,500.00L. A. Winship25,250.00Standard Securities Corp. Finance paper173,721.97Debenture bonds12,957.94Standard Securities Corp. overdraft1,281.84701,088.65These accounts were delivered to Maly, vice president of the bank, as custodian, who placed*3287  them to the credit of Stephenson, trustee, in a special account.  The task of collection was entrusted to Sagehorn, cashier of the bank.  On September 21, 1921, all of the assets of the Hebb Motors Co. were sold by the receiver in bankruptcy for the sum of $126,000, of which the trustee of the pool received $23,847.57.  During 1921, something less than $15,000 was collected from the Standard Securities Corporation paper, and in 1922 the further *318  sum of $17,500, from a sale of the property of the Nebraska Aircraft Corporation.  No further monies from any source were ever collected by the trustee and the total collection being less than $75,000, the amount contributed by Maly, Barkley and Carlsen, preferred contributors, the same was paid on their accounts with nothing over to the remaining contributors.  In 1907 taxpayer McCloud loaned to the firm of M. C. Snyder & Sons the sum of $5,000, and took as security a life insurance policy upon the life of M. C. Snyder in the sum of $5,000.  This policy at the time had no cash surrender value, but under its terms would have after the lapse of five years.  In 1909 or 1910, the firm of M. C. Snyder & Sons went into bankruptcy and*3288  the taxpayer received from the receiver the sum of $1,125 on his claim.  At the time of the bankruptcy proceedings M. C. Snyder came to the taxpayer and stated to him that he, Snyder, was without means for further continuing the payments of premiums on the insurance policy and requested that McCloud protect the same by payment of the premiums until such time as the cash surrender feature of the policy had matured.  McCloud therefore assumed payments of these premiums until he had paid a total sum of $812, after which Snyder resumed payment of them.  In 1923 petitioner compromised his claim with Snyder for the sum of $2,000, upon receipt of which he surrendered back the insurance policy.  The cash surrender value of the policy in 1913 was $1,200.  Petitioner claimed a loss for the year 1923 of $2,687 upon this transaction, as representing the $5,000 originally loaned plus $812 paid in premiums to protect his security, less $1,125 received as dividend from the receiver in bankruptcy and the $2,000 in final settlement with debtor.  OPINION.  LANSDON: The single issue presented by this appeal is whether or not the petitioners sustained losses deductible from their incomes during*3289  the taxable years claimed.  Considering first the issues common to all, the basis of the losses claimed is the contributions made by petitioners to the joint fund placed in the hands of the trustee for the purpose of purchasing the objectionable paper from the bank.  The statutory authority for the deductions claimed is section 214(a) of the Revenue Acts of 1918 and 1921, which are identical in terms and provide as follows: That in computing net income there shall be allowed as deductions: * * * (4) Losses sustained during the taxable year and not compensated for by insurance or otherwise, if incurred in trade or business; *319  (5) Losses sustained during the taxable year and not compensated for by insurance or otherwise, if incurred in any transaction entered into for profit, though not connected with the trade or business; * * * In support of their appeal petitioners urge several theories, viz, first, that the venture was incidental to their regular business as bankers and that the losses therefore were incurred in trade or business and deductible under subparagraph (a)(4) of section 214; second, that if not regular business losses, they were losses incurred in a*3290  transaction entered into for profit and allowable as deductions under subparagraph (a)(5) of said section; and, third, if neither of the first or second class, their losses were incurred through expenditures made in discharge of moral obligations under circumstances which bring them within the rule announced by the Board in . The first contention is untenable.  Petitioners were only engaged in the banking business by and through a legally chartered bank with which they were connected.  When petitioners lifted this paper out and placed it in a private pool, the transaction became an individual venture.  The second contention of petitioners is likewise unsound and fails to find support in the evidence.  Practically the only fact well proven in this case, out of the great mass of testimony, is that which reveals the distressed condition of the bank in the fall of 1920 and during 1921.  There can be no question as to the good faith of these directors in their laudable efforts to save this bank, laboring as they were in the dark, without knowledge as to the real conditions and pledging their private fortunes to this one end.  But this*3291  does not change the character of their acts; it only emphasizes more forcibly the motive which prompted them - the goad, in other words, which stimulated their activity.  In December, 1920, a substantial loss was foreseen by the directors.  They claim that it was their belief at that time that it would not exceed $75,000, but Howey and Dunn knew otherwise and it must be assumed that the directors feared the worst since the pledges they secured from Howey and Dunn at this time were for losses up to $300,000, which was followed by loans made secretly by the directors to the bank in the sum of $195,000.  The bank examiner also was taking an active interest in the affairs of this bank during this period and early in January told Maly, the newly elected vice president, that the bank was in bad shape and that he had better get in there and help straighten things out.  There were also strong hints from him to the effect that the bank might be closed unless its assets were put in a more liquid condition; and it is inconceivable that these directors were unmindful of this grave situation when on April 22d the board met and passed a resolution which called upon the directors to execute notes*3292  or pay in cash the additional sum of $200,000 to take *320  out all slow or doubtful paper.  It was following this, on the same day, that the meeting was held in Stephenson's office, when McCloud suggested that perhaps the best way to get rid of the examiner would be to make a big hole in this stuff and "take it out of the bank." It was here that the pool was agreed upon and there is no evidence that the question of profits was discussed.  The possibility of loss, however, was mentioned and directors Maly, Barkley, and Carlsen demurred joining until the return of their contributions was guaranteed.  There is some evidence to the effect that these contributing directors believed that a substantial profit would be derived by them from a liquidation of the pool assets, but it is far from convincing; and such belief, if seriously considered, does not seem to have entered into the initial discussions at the time of forming the pool or to have formed any part of the motive which prompted the contributors.  In fact, no specific paper or list of papers was considered for purchase by these directors when they met on April 22d and signed the pledges for contributions to the pool.  All*3293  this was to be left to the judgment of the trustee, who would accept such paper as the committee might thereafter select for withdrawal from the bank.  So, in the very nature of things, such speculations were out of place.  It is clear, therefore, that whatever hopes there might have been for profits out of the pool assets must have been inspired after their selection, segregation and delivery to the trustee subsequent to the pledges and payment of the contributions by its members.  Aside from the considerations of investment and expected profits, the petitioners have not met the requirements as to proof of loss as required under the statute.  Much time was consumed at the hearing and voluminous testimony introduced through depositions to show the efforts made to realize upon the assets of the pool, but the great bulk of this evidence was based upon reports, not put in evidence, made by traveling agents sent out by the bank to trace assets, and such was so nebulous in form and unsatisfactory as to details as to be of little or no value in this proceeding.  On the other hand, there is no evidence of any kind to show that the petitioners in any way sought to avail themselves of their*3294  remedy against the bank which sold them these securities.  The resolution adopted by the board of directors of the bank on May 15, 1921, which authorized this sale, provided that the notes and receivables so sold should "bear the endorsement of the said City National Bank," and also provided further "that the officers of the City National Bank * * * are hereby empowered to place in the hands of a trustee agreed upon to represent the directors, additional notes and receivables as collateral to the endorsement of this bank on notes sold to said directors * * *." It is obvious, therefore, that the petitioners had recourse against the bank for any losses they might sustain through their purchase *321  of these accounts, and, in the absence of proof of the insolvency of the bank, or other reasons why it can not be so held, no proof of ultimate loss has been established.  As to the last claim made by petitioners, which it is unnecessary to decide in view of our holding of the failure of petitioners in their proof of loss, it might be well to say that, in our view of the facts here, they are not such as to bring them within the rule laid down in *3295  In that case the deduction claimed was the amount paid in liquidation of a loss actually sustained by a partner in business with the taxpayer.  It was a bona fide business loss which the taxpayer, for certain business reasons, saw fit to assume and in acknowledgment thereof had given his note.  The note, of course, imputed consideration and could only be defeated by repudiation on the part of the taxpayer.  For moral considerations, the taxpayer chose to pay the note and take the whole of the partnership loss as his own.  Moral considerations and their duties to the stockholders of the bank, as well as to the community, may have played a part in causing these directors to take the steps they did, but in the case at bar it was to prevent a loss to the bank, and not to make good a prior loss, which prompted them to act.  Howey and Dunn did voluntarily assume losses, but petitioners took steps to protect themselves and at all times felt that they were moving within a margin of safety.  In denying the deductions claimed by petitioner McCloud, growing out of the loan to M. C. Snyder & Sons, respondent treated the obligation created by the*3296  original loan as a closed transaction as and from the time of the adjudication in bankruptcy.  He considered the insurance policy as the property of petitioner from said date and reckoned its cost to him by taking its surrender value of $1,200 on March 1, 1913, and adding thereto the sum of $300 thereafter paid in premiums, making a total cost of $1,500 to petitioner.  By this process he determined a net gain of $500 to petitioner on the settlement of $2,000 made in 1923.  The basic error of the respondent lies in his treating the title of the insurance policy as having vested in the petitioner at the time of the bankruptcy proceeding.  Such a result never did obtain.  The policy was delivered to the petitioner at the time of the making of the loan as a pledge to insure the payment of said loan, and its character as such was left unchanged by the bankruptcy proceedings.  McCloud had received a dividend of $1,125 from the receiver upon his claim and the debtor requested that he protect the policy against lapse by payment of the premiums until such time as the same would have a cash surrender value.  This offer, when accepted by McCloud, amounted to a new contract, based upon *322 *3297  a valuable consideration, which revived the original debt to the extent of the unpaid balance, and left the pledged security still the property of the debtor subject to the additional claims of McCloud for premiums thereafter paid.  Further evidence of this understanding appears from the subsequent acts of the parties.  Following this arrangement, McCloud paid nine premium installments upon this policy, which carried it up to the time when it had a cash surrender value, after which Snyder himself resumed the payments and so continued until the compromise settlement in 1923.  The rule in , cited by respondent, has no application to the facts in this case.  There the policy dealt with was that of the taxpayer himself, who had bought and paid for it in full prior to March 1, 1913, at which time it had a fixed surrender value.  Here the policy was on the life of another who at all times owned the equity and who was paying the premiums at the time he redeemed it from petitioner.  Petitioner at no time owned this policy, but held it merely to secure the payment of his debt and in case of maturity by death of the insured, would have been held*3298  accountable to the insured's estate or beneficiaries for any surplus over his just claim.  His loss was the unpaid balance of his loan at the time of the bankruptcy as increased by the premiums paid by him to protect the policy, less the sum paid in compromise of the debt.  Decision will be entered under Rule 50.