Court Opinion

ID: 4604052
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:33:20.976689+00
Date Added: 2024-06-11T07:52:56.916036
License: Public Domain

APPEAL OF HARRY E. LUTZ.Lutz v. CommissionerDocket No. 1954.United States Board of Tax Appeals2 B.T.A. 484; 1925 BTA LEXIS 2353; September 8, 1925, Decided Submitted July 31, 1925.  *2353  An assessment paid on bank stock during 1922 is not a deductible loss in that year.  Spencer Gordon, Esq., for the taxpayer.  F. O. Graves, Esq., for the Commissioner.  MARQUETTE *484  Before MARQUETTE and MORRIS.  This is an appeal from the determination of a deficiency in income tax for the year 1922 in the amount of $2,853.20.  The taxpayer contends that he is entitled to a deduction of $23,000 alleged loss through a stockholder's assessment on the capital stock of a state bank.  FINDINGS OF FACT.  The taxpayer, a resident of Seattle, Wash., at all times since its organization in 1895 has been a stockholder of the Bank of Clallam County, located at Port Angeles, Wash.  He has been president of the institution since its organization and since 1896 has owned 92 per cent of its capital stock which consists of 250 shares, par value, $100.  All of the taxpayer's stock was purchased by him at par.  On March 1, 1913, the bank had a surplus of $3,500.  In 1920 the stockholders of the bank contributed $17,000 to it for the purchase of a building.  The taxpayer's share of this contribution was $15,640.  In March, 1922, the Supervisor of Banking*2354  of the State of Washington required the bank to charge off $25,000 of assets and ordered a 100 per cent assessmant on the capital stock.  The taxpayer paid $23,000 as his share of this assessment in April, 1922.  During October, 1923, the bank was required to charge off $180,000 of loans and another 100 per cent assessment was levied against the *485  stockholders.  The taxpayer again paid $23,000 as his share of the assessment.  The Bank of Clallam County was not declared insolvent nor was it dissolved, but continued to do a banking business during 1923.  During December, 1923, it was merged with the Washington State Bank of Port Angeles, Wash.The taxpayer did not sell his stock during 1922.  He believes that it could not have been sold nor given away during that year because of the possibility of assessments against stockholders.  DECISION.  The determination of the Commissioner is approved.  OPINION.  MARQUETTE: The taxpayer contends that the $23,000 paid as an assessment on his stock during 1922 is a deductible loss in that year.  The question presented is whether or not the sum paid as an assessment was a loss or an additional investment of capital.  On*2355  the facts before us we are clearly of opinion that the assessment was an additional investment of capital.  ARUNDELL not participating.