Court Opinion

ID: 4611150
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:48:23.804687+00
Date Added: 2024-06-11T07:54:11.617395
License: Public Domain

C. R. DASHIELL, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Dashiell v. CommissionerDocket No. 75056.United States Board of Tax Appeals36 B.T.A. 313; 1937 BTA LEXIS 740; July 13, 1937, Promulgated 1937 BTA LEXIS 740">*740  Cash sale on Exchange in 1931 establishes loss in that year even though borrowed shares were delivered to purchaser and seller did not deliver his shares to his broker until 1932.  Henry O. Harriman, Esq., for the petitioner.  Elmer L. Corbin, Esq., for the respondent.  MURDOCK 36 B.T.A. 313">*313  The Commissioner determined a deficiency of $6,080.41 in the petitioner's income tax for the year 1931.  The only issue is whether the Commissioner erred in disallowing a deduction of $30,245 representing a loss from the sale of 500 shares of Vanadium stock on December 31, 1931.  FINDINGS OF FACT.  The petitioner is an individual.  He filed his return for 1931 with the collector of internal revenue for the first district of Illinois.  The petitioner on December 30, 1931, was in Florida.  He owned at that time 500 shares of Vanadium stock which he had purchased in March 1931 at a cost of $36,662.50.  The certificates for these shares were in his safe deposit box in Chicago.  He owned no other shares of the stock.  He called his broker in Chicago on the telephone on December 30, 1931, and instructed the broker to sell for him, inter alia, the 500 shares of1937 BTA LEXIS 740">*741  Vanadium at once.  He and the broker agreed that he would deliver the shares upon his return to Chicago in January 1932.  The broker, through another broker in New York, sold 500 shares of Vanadium on the New York Stock Exchange for the petitioner on December 31, 1931, for $6,417.50.  The New York broker delivered on that day certificates for 500 shares to the purchaser.  The shares delivered were shares in the possession of the New York broker which it loaned for the purpose.  The New York broker on December 31, 1931, credited the proceeds of the sale and charged the 500 shares to the Chicago broker.  The Chicago broker credited the proceeds of the sale and charged the 500 shares to the petitioner on December 31, 1931.  The sale was handled as a "cash" sale, as that term is used on the New York Stock Exchange, and not as a "short" sale.  The petitioner delivered his certificates for 500 shares of Vanadium to his broker on January 30, 1932.  The petitioner deducted his loss of $30,245 on his return for 1931.  The Commissioner disallowed the loss.  36 B.T.A. 313">*314  OPINION.  MURDOCK: The Commissioner disallowed this loss on the theory that the transaction was a short sale and was not1937 BTA LEXIS 740">*742  closed until delivery of the certificates in 1932.  He was in error.  This was not a short sale as short sales are made on the New York Stock Exchange.  It was a cash sale with immediate delivery by an agent of the seller.  The sale took place on December 31, 1931.  The parties so intended.  The petitioner sustained his loss in that year.  A sale may take place before delivery of the dertificates.  In fact such is usually the case on the Exchange.  Delivery on regular sales is not made until a day or so after the sale has taken place.  The certificates which the petitioner had after the sale were certificates which he owed to the brokers to repay their loan of certificates to him.  The Commissioner concedes that this case is like the case of , and cases there cited. Decision will be entered under Rule 50.