Court Opinion

ID: 4592649
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:08:26.120547+00
Date Added: 2024-06-11T07:50:54.170482
License: Public Domain

MERRITT J. CORBETT, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Corbett v. CommissionerDocket No. 22491.United States Board of Tax Appeals16 B.T.A. 1231; 1929 BTA LEXIS 2430; June 28, 1929, Promulgated 1929 BTA LEXIS 2430">*2430  Losses on sales of stocks allowed as deductions from gross income.  John E. Hughes, Esq., and William Cogger, Esq., for the petitioner.  W. F. Gibbs, Esq., and O. W. Swecker, Esq., for the respondent.  MARQUETTE 16 B.T.A. 1231">*1232  This proceeding is for the redetermination of a deficiency in income tax asserted by the respondent for the year 1923 in the amount of $11,747.21.  The deficiency arises from the disallowance of deductions in the amount of $88,379.12 taken by the petitioner on account of alleged losses from the sale of stocks.  The deficiency letter also asserts a deficiency for 1922 in which the petitioner acquiesces.  FINDINGS OF FACT.  The petitioner is an individual residing at Belair, Fla.  Subsequent to 1923, and prior to December 20, 1923, the petitioner, then a resident of Binghamton, N.Y., purchased certain shares of stock for $77,890.62.  By December 20, 1923, the market value of said stocks had declined and on that date the petitioner, for the purpose and with the intent to establish a loss which he could deduct in computing his net income for the year 1923, sold and delivered said shares of stock to Chittenden, Phelps & Co. 1929 BTA LEXIS 2430">*2431  , brokers of Binghamton, N.Y., at the market, and received from them a check for $49,760.50 in payment, which check was cashed and the amount thereof deposited to the petitioner's account.  On the same day the petitioner instructed the cashier of the bank with which he dealt, to purchase for the account of his, the petitioner's wife, after more than 30 days from that date, shares of stock of the same kind and in the same amount as the petitioner had that day sold.  The cashier of the bank followed the instructions given him by the petitioner and purchased shares of stock of the kind and in the amount directed, and they were several months later delivered by the said cashier to the petitioner's wife and have never been in the possession of or owned by the petitioner.  The petitioner paid for the stock so purchased for his wife by check dated January 21, 1924.  In the year 1921 the petitioner purchased 10 shares of the capital stock of the Hayden Petroleum Co. for $100, and sold them in 1923 for not more than $10, thereby sustaining a loss of at least $90.  The respondent, upon audit of the petitioner's return for 1923, refused to allow any deduction from gross income on account of1929 BTA LEXIS 2430">*2432  losses from the sales of stock above set forth.  OPINION.  MARGUETTE: The record is clear that in 1921 the petitioner purchased 10 shares of the capital stock of the Hayden Petroleum Co., and that he sold them in 1923 for not more than $10.  He thereby sustained a loss of at least $90, which should be deducted in computing his net income for 1923.  With reference to the other transaction, the petitioner claims a deduction from gross income under authority of section 214(a)(5) of the Revenue Act of 1921, which provides that: 16 B.T.A. 1231">*1233  SEC. 214.  (a) That in computing net income there shall be allowed as deductions: * * * (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; but in the case of a nonresident alien individual only if and to the extent that the profit, if such transaction had resulted in a profit, would be taxable under this title.  No deduction shall be allowed under this paragraph for any loss claimed to have been sustained in any sale or other disposition of shares of stock or securities made after the passage1929 BTA LEXIS 2430">*2433  of this Act where it appears that within thirty days before or after the date of such sale or other disposition the taxpayer has acquired (otherwise than by bequest or inheritance) substantially identical property, and the property so acquired is held by the taxpayer for any period after such sale or other disposition.  If such acquisition is to the extent of part only of substantially identical property, then only a proportionate part of the loss shall be disallowed.  The evidence shows that the petitioner actually sold the stock in question at the market and received and cashed the purchaser's check therefor.  On the same day he gave instructions to his banker to repurchase for the account of his wife, stocks of the same kind and amount as those he had sold, the purchases to be made more than 30 days thereafter, and it appears that the banker followed the instructions given him and that the petitioner has never at any time had or claimed any interest in the stock so purchased.  We are satisfied that the sale made by the petitioner was bona fide; that it gave rise to a loss of $28,130.12, and that the petitioner is entitled to deduct the amount of the loss from income for 1923 under1929 BTA LEXIS 2430">*2434  the provision of law above quoted.  ; ; ; and . Judgment will be entered under Rule 50.