Court Opinion

ID: 9443162
Source: CourtListenerOpinion
Date Created: 2023-08-03 19:12:52.543658+00
Date Added: 2024-06-11T17:29:23.770885
License: Public Domain

CHASE, Circuit Judge.
When Frank D. Waterman died in 1938, he left as part of his estate, of which Frank S. Waterman is the sole surviving executor and the petitioner herein, a non-interest bearing bill of exchange for ten thousand pounds signed by L. G. Sloan, Ltd., of London, England. That bill of exchange was valued for estate tax purposes at $46,806.-94.
In 1945, the obligation was paid by depositing ten thousand pounds to the credit of the petitioner in a London bank where it was held throughout 1945, because of currency restrictions of the British government, in a blocked sterling account. Pounds in such a blocked account were not convertible into dollars during 1945 but, *245throughout that year, the official rate of exchange for convertible pounds was $4.04. The petitioner filed a fiduciary income tax return for the estate in 1945 in which no loss deduction was claimed on the collection of the bill of exchange but the Commissioner determined a deficiency in taxes on income as reported in that return and, in the proceedings which followed, the deduct-ibility of a claimed loss on the collection of the obligation was put in issue. The amount so claimed is $6,406.94, which is the difference between the value of the obligation in dollars at the decedent’s death and the value in dollars of ten thousand convertible pounds at the date of payment.
The Tax Court held that no loss deduction was allowable because it had not been shown that the decedent acquired the note either in a business transaction or in one entered into for profit and, accordingly, upheld the Commissioner’s determination without finding it necessary to deal with any other questions.
This loss deduction was claimed under Sec. 23(e) (2) I.R.C, 26 U.S.C.A. § 23(e) (2), and its allowance is, by the terms of the statute, conditioned upon its having been sustained by the taxpayer in a “transaction entered into for profit”. But, whether the decedent acquired it in such a transaction is not decisive since the estate is a taxpayer separate and distinct from the decedent. Sections 161, I.R.C, 26 U.S.C.A. § 161; Herbert’s Estate v. Commissioner, 3 Cir, 139 F.2d 756, certiorari denied, 322 U.S. 752, 64 S.Ct. 1263, 88 L.Ed. 1582. The controlling consideration is, therefore, whether the acquisition of the obligation by the executor in behalf of the estate was a “transaction entered into1 for profit” in the statutory sense. That it was follows from the nature of the duty of the executor in dealing with assets of the estate coming into his hands. That düty excludes the possibility of his holding this asset for any personal use. Cf. Carnwick v. Commissioner, 9 T.C. 756. On the contrary, it required him to dispose of it on the best terms possible and to account to the estate for whatever, if anything, he could legitimately get above the amount at what it was valued when he acquired it. That his collection of the obligation was a disposition of it on the best possible terms stands unquestioned on this record. Collection was a taxable event. Herbert’s Estate v. Commissioner, supra; Hatch v. Commissioner, 2 Cir, 190 F.2d 254; Helvering v. Roth, 2 Cir, 115 F.2d 239. Since the most he could get was less than the value of the asset when he acquired it a transaction entered into for profit resulted in a deductible loss.
When the note was paid in blocked pounds, the taxpayer “realized” the value in dollars of such foreign currency in that taxable year notwithstanding the fact that, because the pounds were “blocked,” the recipient was then unable to convert them into American money. Eder v. Commissioner, 2 Cir, 138 F.2d 27. By the same token, the taxpayer sustained a loss when the note was so paid and that fixed the time as of which the loss was allowable. It may be that the loss was actually more than claimed for that has been computed by the taxpayer on the basis of unblocked pounds while blocked pounds were presumably worth less. However, it is obvious that the loss was at least as great as that claimed and the petitioner is entitled to that part which has been proved regardless of whether it may have been more. Cf. Cohan v. Commissioner, 2 Cir, 39 F.2d 540.
Decision reversed and cause remanded for an allowance of the loss claimed.

. Section 23(e) also permits deductions of other sorts of losses not here pertinent.