Court Opinion

ID: 4628154
Source: CourtListenerOpinion
Date Created: 2020-11-21 03:02:46.372795+00
Date Added: 2024-06-11T07:57:09.889448
License: Public Domain

H. H. MOYER, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Moyer v. CommissionerDocket No. 8748.United States Board of Tax Appeals12 B.T.A. 429; 1928 BTA LEXIS 3543; June 6, 1928, Promulgated *3543 Held that the petitioner did not sustain a deductible loss in 1920 with respect to the stock in a corporation.  W. H. Jamieson, Esq., for the petitioner.  Brice Toole, Esq., for the respondent.  TRAMMELL*429  This is a proceeding for the redetermination of a deficiency in income tax in the amount of $1,316.09 for the year 1920.  The deficiency arises from the action of the respondent in disallowing a deduction claimed by a partnership of which the petitioner was a member on account of stock claimed to have become worthless during the taxable year.  FINDINGS OF FACT.  The petitioner is a member of the partnership of Newton & Moyer, having a 50 per cent interest.  The partnership had its principal place of business at Altoona, Pa., and was engaged in selling coal.  One of their customers was the Franklin Coal & Coke Co.  In 1919 *430  that company owed the partnership approximately $27,000 for coal shipped to it in the prior year.  Several payments were made on this indebtedness during the first part of 1919.  In July of that year conditions became had and a reorganization was effected by the Franklin Coal & Coke Co., in which the*3544  creditors, including the partnership of which the petitioner was a member, took preferred stock for 85 per cent of their indebtedness.  Under this arrangement the partnership acquired $18,320 par value of the preferred stock in the Franklin Coal & Coke Co. in satisfaction of the debt.  The Franklin Coal & Coke Co. operated in 1920 and paid two or three regular quarterly dividends of 6 per cent that year.  In December, 1920, Dungan, the vice president of the Franklin Coal & Coke Co. and principal salesman, called the partnership on the telephone and stated that he had decided to leave the Franklin Coal & Coke Co.  Prior to that time the partnership had made some efforts to sell its stock and in December, 1920, made other efforts to sell without success.  The partnership offered the stock to E. R. Tatnell, who was president of that company, and he refused to buy at any price.  The partnership took a deduction in 1920 in determining its net income for that year of 75 per cent of the amount paid for the stock.  This amount was disallowed as a deduction by the Commissioner.  The Franklin Coal & Coke Co. continued in existence as a going concern throughout 1920 and Dungan did not*3545  resign or leave the company until 1921.  OPINION.  TRAMMELL: It is contended by the petitioner that the preferred stock of the Franklin Coal & Coke Co. became worthless in December, 1920.  The petitioner testified that he considered the stock worthless when he received information that Dungan the principal salesman would resign and not be further connected with the company; that the success of the business depended upon Dungan remaining with it.  The fact is, however, that Dungan did not resign until 1921.  the petitioner further relies in support of his contention that the stock was worthless upon the fact that he was unable to sell it in December, 1920, and did not receive an offer for it, and that Tatnell, The petitioner further relies in support of his contention that the We were not furnished, however, with a statement of the assets and liabilities of the company and there is nothing in the record to indicate that the company did not have earnings in December, 1920.  It was at that time a going concern and its principal salesman still remained with it.  The fact that Tatnell the president of the company would not buy the stock and stated that it was worthless *431 *3546  is not sufficient, in view of all the other evidence in the case, to establish the fact of worthlessness.  The stock was preferred as to dividends and assets and while the evidence might warrant the conclusion that at the end of 1920 the stock had suffered a reduction in value, we can not find from the entire record that the stock was worthless in 1920.  Judgment will be entered for the respondent.