Court Opinion

ID: 4495430
Source: CourtListenerOpinion
Date Created: 2020-01-23 18:14:19.568197+00
Date Added: 2024-06-11T15:04:02.839043
License: Public Domain

Black,
dissenting: I am not convinced that there is sufficient distinction in the facts in the instant case to justify a different result from that reached in Donald McDonald, Jr., Administrator, 28 B. T. A. 64, distinguished in the majority opinion.
In the McDonald case the Board, after discussing Congressional intent with reference to the provisions of law allowing deductions for losses, said:
* * * However that may be, we think that they did not intend to allow a deduction for that part of the loss which resulted in this case from paying more than a fair price for tire stock. The excess cost was paid for personal reasons, which would not have been paid otherwise, and cannot be the basis of a loss.
Petitioner, at the hearing in the instant case, did not advance any reason as to why he paid $130,700 for stocks which were transferred to him on August 27,1930, and which on that date admittedly had a fair market value of only $111,200. The latter part of the majority opinion states that petitioner made no explanation of the reasons which prompted him to pay more for the stock than it was worth. The majority opinion states we must be left to inference as to why this was.
If we are to be left to inferences, are we not justified in reaching the same conclusion as in the McDonald case, where it is said, “ The excess cash was paid for personal reasons which would not have been paid otherwise and cannot be. the basis of a loss ”. It seems to me that it was the business of the petitioner to explain why he paid $19,500 more for these stocks than their fair market value on the day they were transferred to him.
There is another angle from which I think this transaction may be properly viewed and which furnishes a logical explanation, and that is this: The $500,000 in cash bequeathed to petitioner in his father’s will, not being required to be paid out of any particular fund, was a general bequest and not a specific bequest. Cf. Harry G. Haskell, 30 B. T. A. 855. The executor determined to pay this general bequest in stocks rather than in cash, except as to the $2,600 paid in cash.
If my construction of the transaction in this respect is correct, then unquestionably the basis for loss as provided in section 113 (a) (5), Kevenue Act of 1928, is the fair market value of the stocks at the date of distribution, to wit, $111,200. I cannot agree that the basis for gain or loss on these stocks is $130,700, their fair market value at the date of the death of decedent. This would be true if the stocks had been bequeathed to petitioner by specific bequest, but is not true where they come to him under a general bequest. See section 113 (a) (5), (Revenue Act of 1928.
Murdock agrees with this dissent.