Court Opinion

ID: 4625259
Source: CourtListenerOpinion
Date Created: 2020-11-21 02:56:52.612003+00
Date Added: 2024-06-11T07:56:39.831571
License: Public Domain

TOM (FAYETTE T.) MOORE, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Moore v. CommissionerDocket No. 18273.United States Board of Tax Appeals19 B.T.A. 140; 1930 BTA LEXIS 2457; February 28, 1930, Promulgated *2457  1.  An amount paid by the petitioner for services of an architect in preparing plans for a project which was not carried out held to be deductible as a loss in the year in which the project was abandoned.  2.  The respondent's action in refusing to allow deductions from gross income on account of alleged losses, sustained.  3.  The petitioner executed under seal an instrument giving to his wife, his mother and his sister, 85 per cent of certain shares of corporate stock then owned by him, but reserved to himself the right to act as the agent of his wife, his mother and his sister in the management or subsequent sale of said stock.  The instrument was executed in quadruplicate and was delivered to the persons named.  The stock mentioned in the instrument could not be delivered to the donees at that time because of certain voting-trust agreements.  The stock was subsequently sold.  Held that the instrument operated to convey to the petitioner's wife, his mother, and his sister an 85 per cent interest in said stock and that upon the subsequent sale thereof only 15 per cent of the proceeds of the sale belonged to, and constituted income to the petitioner.  W. T. Peake,*2458  Esq., and W. C. Sullivan, Esq., for the petitioner.  Eugene Meacham, Esq., and C. E. Lowery, Esq., for the respondent.  MARQUETTE *141  This is a proceeding for the redetermination of deficiencies in income taxes asserted by the respondent in the following amounts: For the year 1919$3,272.01For the year 1920108,501.33For the year 19214,505.34The errors alleged in the petition are that the respondent: (1) Increased the income and tax of the petitioner for the years 1919 and 1921 although the petitioner's returns disclosed not less than his true net income for each of said years.  (2) Included, in gross income for 1920, $150,000, representing alleged profit on sale of certain stocks, only 15 per cent of which, it is alleged, was owned by the petitioner at the time of sale.  (3) Disallowed as a deduction from gross income in 1920, $162,500 representing loss incurred in the sale of certain capital assets.  At the hearing the pleadings were amended and raised additional issues, namely: (4) Whether profit to the petitioner in 1920 from sale of stock of a theatre company should be reduced by the amount of advances*2459  by the petitioner to the company in prior years.  (5) Whether the petitioner, for the year 1920, may deduct $4,000 architect's fees paid by him in 1920 for plans for a project which was abandoned later in that year.  (6) Whether the petitioner, for the year 1921, may deduct $4,800 architect's fees paid by him in 1919 for plans for a project which was abandoned in 1921.  FINDINGS OF FACT.  The petitioner is an individual residing in the District of Columbia.  In 1906 he and his father started a moving picture film business.  At first the petitioner gave only his time to the business, his father furnishing the capital.  Later, the petitioner and his wife each contributed some money to the enterprise.  The petitioner's father died in 1918, leaving no will.  Most of the decedent's estate consisted of his interest in the business.  In 1916 the petitioner acquired 1,350 shares of the capital stock of the First National Exhibitors Circuit, Inc., of New York.  In 1917 the Rialto Theatre Co. was incorporated by the petitioner, who transferred to that company his 1,350 shares of First National Exhibitors stock.  Shares of stock of the Rialto Theatre Co. were issued to the petitioner's*2460  wife, to his mother, and to his sister.  These shares were subsequently surrendered to the petitioner, who also reacquired the 1,350 shares of First National Exhibitors stock.  *142  On November 7, 1917, the petitioner entered into an agreement, under seal, with J. A. Muehleisen, Tucker K. Sands, and Fred S. Swindell, the pertinent provisions of which are as follows: WHEREAS the parties hereto have agreed upon matters and things hereunto set forth: Now, THEREFORE, in consideration of the mutual covenants hereinafter contained, and the sum of One Dollar (1.00) each to the other in hand paid, it is hereby covenanted and agreed as follows: I.  The said Tom Moore, party of the first part, will assign, transfer and convey unto the Metropolitan Theatres Corporation of Washington, D.C., a corporation incorporated under the laws of the State of Delaware, the following described property: (a) Certain real estate located in Square numbered 405 in the City of Washington being all of the real estate title to which now is held by the Rialto Theatre Corporation; (b) The entire capital stock of the Casino Theatre Company, a corporation organized under the laws of the State of Virginia, *2461  said company being the company now operating a theatre known as the Garden Theatre, Washington, D.C.; and (c) The entire capital stock of the Orpheum Theatre Company, a corporation organized under the laws of the District of Columbia, said company being the company now operating the theatre known as the Strand Theatre in Washington, D.C.  * * * II.  The party of the first part shall by such conveyances as are essential or necessary assign, transfer, and convey all of the right, title, and interest in and to the stock and franchise in the First National Exhibitors Exchange, Incorporated, held and owned by him, to the sole use and benefit of the said Metropolitan Theatres Corporation of Washington, D.C.  III.  The said parties of the second part hereby agree that there shall be issued to the said party of the first part in consideration for the transfer of said property, fully paid and nonassessable, the entire capital stock of the aforesaid Metropolitan Theatres Corporation of Washington, D.C., said capital stock amounting to the sum of One Million Dollars ($1,000,000) preferred and One Million Dollars ($1,000,000) common.  IV.  The said parties of the second part hereby agree*2462  to refund to the said Tom Moore a part of the moneys heretofore advanced by him in the purchase of the Rialto Theatre site, to the extent of the sum of One Hundred Thirty-seven Thousand Five Hundred ($137,500) dollars, as follows: The sum of Fifty Thousand ($50,000) Dollars in cash upon the execution and delivery of this agreement; and the sum of Fifty Thousand ($50,000) Dollars within forty-five days thereafter; and the balance of Thirty-seven Thousand Five Hundred ($37,500) Dollars within sixty days thereafter; and in consideration thereof and of other good and valuable considerations as more particularly set forth in the covenants and agreements on the part of the parties of the second part to be performed as specified herein; the said party of the first part hereby covenants and agrees to immediately assign, transfer, and deliver to the said parties of the second part forty-nine per cent (49%) of the aforesaid preferred and common capital stock of the Metropolitan Theatres Corporation, of Washington, D.C.* * * X.  The parties of the second part further agree to refund to the party of the first part the amount advanced by him on account of the first National Exhibitors *143 *2463  Exchange, a note of the said Metropolitan Theatre Corporation to be delivered to said party of the first part therefor.  At that time the stock which the petitioner agreed to sell had a fair value of $300,000, and its acquisition had cost the petitioner $300,000.  This agreement was carried out only in part.  The land on which the Rialto Theatre was built and the Orpheum Theatre Co. stock were transferred to the Metropolitan Theatres Corporation, the entire capital stock of which was issued to the petitioner.  He also received in cash the $137,500 mentioned in the agreement, but never received from the Metropolitan Corporation its promissory note, the amount of which was to have been $162,500.  This amount has never been paid to the petitioner and he did not turn over the capital stock of the Casino Theatre Co.  However, the operation of the Strand Theatre (which was owned by the Orpheum Co.) and of the Garden Theatre (which was owned by the Casino Co.) was turned over to the Metropolitan Corporation.  The name of the latter company was later changed to Moore's Theatres Corporation.  In May, 1919, Moore's Theatres Corporation transferred to the petitioner all of its interest in*2464  and to the Garden and Strand Theatres, the stock of the Orpheum Theatre Co., and the stock of the First National Exhibitors Circuit.  Early in 1920 the First National Exhibitors Circuit, Inc., was reorganized, the name was changed to Associated First National Pictures, Inc., and the stockholders of the old company became stockholders in the new company.  In accordance with a uniform plan, the petitioner organized the "Associated First National Pictures of Washington, D.C." and received all of its capital stock, 1,350 shares, in exchange for his 1,350 shares of stock in the Associated First National Pictures, Inc.  On or about the 27th day of July, 1920, the petitioner executed the following: ASSIGNMENT OF INTEREST WHEREAS, I, Tom Moore, of the City of Washington, District of Columbia, am about to organize a corporation known as the Associated First National Pictures, of Washington, D.C., Incorporated, in which corporation, according to the proposed plan of formation, all of the capital stock will be issued to me and deposited by me with the Corporation Trust Company of New York as trustee, I will retain only the equitable interest therein represented by trust certificates and*2465  will be required to deposit said trust certificates with the Associated First National Pictures, Incorporated, of New York as collateral security for certain agreements I am about to sign; and WHEREAS, I have promised and agreed in consideration of my natural love and, affection toward certain of my immediate family that I would give them certain portions of my stock in said corporation, which, however, it is impossible *144  for me to deliver to them because of the arrangement made for the depositing of the stock and trust certificates as aforesaid; and WHEREAS, I desire to carry out and perform fully the spirit of my undertaking; NOW, THEREFORE, THIS AGREEMENT WITNESSETH that for and in consideration of the natural love and affection toward those hereinafter named and the further sum of One Dollar ( $1) to me in hand paid, I do hereby give, assign, transfer and convey to my wife, Nettie Irene Moore, 50 per cent shares of stock in aforesaid Associated First National Pictures of Washington, D.C., Incorporated, and to my Mother, Ida B. Moore, 25 per cent shares of stock of said corporation, and to my sister, Ida B. O'Neill, 10 per cent shares of stock of said Corporation; *2466  BEING COVENANTED AND AGREED that proportionate share of any dividends received or proceeds realized from the sale of said stock shall as to the proportion thereof hereby given and granted to the above-named persons shall be and remain the sole and exclusive property of the said persons absolutely, reserving to myself only the right and authority to act as their agent in the management or sale of said stock and receiving for their benefit any dividends therefrom or proceeds derived from the sale thereof.  IN WITNESS WHEREOF I have hereunto set my hand and seal and acknowledged the foregoing instrument as my act and deed.  (Signed) TOM MOORE (Seal).  The foregoing instrument was executed in quadruplicate and was delivered to each of the persons named therein.  Because all of said stock was to be deposited in trust, none of it was delivered to the petitioner's mother, wife, or sister.  On or about August 3, 1920, the petitioner sold all of the said 1,350 shares of First National Pictures stock to one Williams for a consideration of $150,000.  The petitioner has not yet made any final settlement with his mother, wife, or sister of their proportionate shares under the above*2467  assignment of interest.  Beginning on August 7, 1920, the petitioner sent his personal checks to his mother weekly for about four years.  The aggregate amount of those checks is $7,035.  He has also paid $1,897.58 for a new roof for his mother's house.  To his sister mentioned in the assignment of interest he sent his personal checks for about two years, beginning August 7, 1920, in the aggregate amount of $3,135.  In addition he paid some rentals for her.  On December 21, 1920, a bill in equity was filed in the Supreme Court of the District of Columbia by Charles Selden, Jr., and Milton Baer, against Moore's Theatres Corporation and Fayette T. Moore, the latter defendant being the present petitioner.  The allegations of the bill which are material to this proceeding are as follows: The plaintiffs respectfully represent as follows: 1.  That they are citizens of the United States residing in the District of Columbia and file this suit in their own behalf and for the benefit of other persons or stockholders similarly situated.  *145  2.  That the plaintiff, Moore's Theatres Corporation, is a corporation organized under the laws of the State of Delaware but conducting business*2468  solely within the District of Columbia, and having its principal office and place of business therein as hereinafter more particularly set forth; the defendant, Fayette T. Moore, otherwise known as Tom Moore, is a citizen of the United States and a resident of the District of Columbia and is sued in his own individual right as will more fully appear hereafter.  3.  That the plaintiff, Charles Selden, Jr., is the owner of Certificate No. 103 for 100 shares of the common stock of the Defendant, Moore's Theatres Corporation, of the par value of $10,000, the said certificate having been duly issued fully paid to one Tucker K. Sands, by the said corporation on the day of November, 1917, and Thereafter, to-wit; on the 15th day of March, 1918, duly assigned and delivered by said Tucker K. Sands for value received to one B. Frank Fuller and thereafter, to-wit, on or about the 10th day of November, 1919, assigned and delivered by said B. Frank Fuller to the plaintiff, Charles Selden, Jr., for a valuable consideration; a photographic copy of said certificate with the assignments endorsed thereon is hereto attached, marked "Plaintiff's Exhibit A" and made a part of this bill of complaint.  *2469  4.  That the plaintiff, Milton Baer, is the owner of Certificate No. 102 for one hundred shares of the common stock of the defendant corporation, Moore's Theatres Corporation, of the par value of $10,000.00, the said certificate having been duly issued, fully paid, to the said Tucker K. Sands by the said corporation on the day of November, 1917, and thereafter, to-wit, one the 15th day of March, 1918, assigned and delivered by the said Tucker K. Sands to the said B. Frank Fuller for valuable consideration, and thereafter, to-wit, on or about the 11th day of February, 1919, assigned and delivered by the said B. Frank Fuller to the plaintiff, Milton Baer, for a valuable consideration; a photographic copy of said certificate with the assignments endorsed thereon, is hereto attached marked "Plaintiff's Exhibit B", and made a part of this bill of complaint.  Plaintiff's Exhibits A and B are prayed to be read and taken as a part hereof.  5.  That your plaintiffs heretofore presented said certificates as assigned to the president and other proper officers of defendant corporation requesting and demanding that the same be transferred to their respective names on the books of the said corporation, *2470  but the president and other proper officers of said corporation have failed, refused and still refuse to transfer the same.  * * * 14.  In or about the month of July, 1920, the First National Exhibitors Circuit, Inc., having been theretofore reorganized as to the Associated First National Pictures, Inc., and the defendant Moore having surrendered his stock and franchise in the former company for an equal proportionate amount of stock and similar franchise in the latter company, said defendant Moore sold and transferred his entire interest in said stock and franchise and completely divested himself of the power to control the exhibition of First National Pictures for a sum of money which plaintiffs are informed and believe and therefore aver was $150,000.00, with the result that said pictures are now controlled by persons who are competitors of the defendant corporation and are no longer available to the Rialto Theatre, as provided in the agreement and contract mentioned above.  15.  Said defendant Moore has converted to his own use moneys of the defendant corporation by paying bills and expenses which were properly chargeable to himself personally or to other corporations in*2471  which he was interested, and by other means which can only be ascertained by an examination and audit of the defendant corporation's books; that he has loaned moneys to the defendant corporation for which he has charged and received large bonuses, and he has *146  otherwise conducted the business of said corporation in such manner as to divert its legitimate profits and its assets to his personal use and benefit.  16.  But after receiving the said $150,000, from the sale of the Association First National Pictures, Inc., as aforesaid, and after having received large sums of money from the various manipulations of the funds of the defendant corporations, as hereinabove set forth, the defendant Moore used approximately $75,000 of the funds so received by him for the purchase of an overdue mortgage upon the real estate hereinabove described, upon which the said Rialto Theatre is located, that said second mortgage was recorded in Liber 4267 folio 347, of the land records of the District of Columbia and is a trust nominally to American Security and Trust Company, a corporation trustees to secure Will I. Lanning, a note of $75,000 dated on or about the 10th day of November, 1919, *2472  and maturing November 9, 1920, that at the maturity of said note the said Moore used $75,000 of the funds which rightfully belonged to the defendant corporation for the purpose of nominally purchasing the said mortgage which has been transferred to him personally or to some other person acting for him, and is now held by him or by such other person for him.  The plaintiffs aver that the payment of the said sum of $75,000 is substantially a satisfaction of said mortgage and that the said Moore rightfully holds the same for the benefit of said corporation, and that the same should be delivered up and cancelled.  * * * Thereafter, on May 11, 1922, the court entered a decree in the above-mentioned suit, the material portion of which is as follows: 2.  It appearing to the Court that the deed of trust note for Seventy-five Thousand dollars ($75,000) dated November 10, 1919, executed by Moore's Theatres Corporation to the order of William L. Lanning, has, since the trial and submission of this cause, been cancelled and the deed of trust securing same recorded among the Land Records of the District of Columbia in Liber No. 4267 at folio 347, has been released by the American Security*2473  & Trust Company, Trustee, the division made by the defendant, Fayette T. Moore, of the One Hundred Fifty Thousand dollars ($150,000) received from the First National Exhibitor Circuit, Inc., as referred to in the evidence herein is hereby approved.  It is further ordered that said defendants be and they are hereby required to enter upon the books of account of the said corporation the receipt by the said corporation of the sum of Seventy-five Thousand dollars ($75,000), said entry to be made as of November 9, 1920, and that a further entry be made upon the books of account of the said corporation showing that the said deed of trust note was paid with said sum on that date and subsequently cancelled.  * * * The court also gave judgment against the said Fayette T. Moore in favor of the plaintiffs for the use of Moore's Theatres Corporation in the amount of $12,346.15.  In April, 1920, an agreement was executed, the pertinent portions of which read as follows: WASHINGTON, D.C., Apr. 13, 1920.Received of Walter W. Hall, the sum of Five Thousand ($5,000) Dollars in cash, in part payment of the hereinafter described property at the price and upon the terms hereinafter stated, *2474  to-wit; *147  The business known as the Strand Theatre, situated on the east side of Ninth Street, N.W. and north of D Street, including the good-will, interest, leases, signs, scenery, curtains, draperies, ticket machines, licenses, screens, projection machines, lights, electric sign, furniture, movable fixtures, and all other personal property not hereinabove specifically mentioned now in and upon the said Strand Theatre property, or which may be in anywise belonging to the seller and forming part of its Strand Theatre business and assets.  Terms of Sale: Price Fifty four thousand, Five hundred ($54,500) Dollars cash now paid, receipt of which is hereby acknowledged by the seller; Five thousand ($5,000) Dollars within thirty (30) days from the date of this receipt, and Forty four thousand, Five hundred ($44,500) Dollars on or before June 26, 1920, possession to be given June 26, 1920, and any and all lease or leases of said premises to be then assigned to the named, or to a corporation to be formed by the purchaser.  The present lease on the property at $16,000 per annum rent expiring February 15, 1924, shall be legally transferred to the purchaser, or to the corporation*2475  he shall have formed, or to assign, or cause to be assigned, to the purchaser and such parties as he may name, all of the stock of the Moore's Orpheum Theatre Company, a corporation formed under the laws of the District of Columbia, and the lessee of said property, which stock is now either owned or controlled by Fayette T. Moore; and in such case the said Fayette T. Moore, in consideration of the premises, and the further sum of one dollar, agrees with the purchaser to hold him harmless, and any corporation he may form as his assignee, against any and all debts and claims against said Moore's Orpheum Theatre Company that may be in force or effect against it up to the 27th day of June, 1920.  * * * The seller guarantees and warrants that he has the right to convey the property hereby sold and that there are no debts, claims, liens, or other incumbrances against the property sold.  This agreement binds the heirs, executors, administrators, successors and assigns of both the seller and the purchaser.  This agreement is an agreement of purchase and not an option, and each party agrees to carry out the agreements on his part made in duplicate.  (Signed) MOORE'S ORPHEUM THEATRE*2476  CO.  BY TOM MOORE, President, Seller.I hereby approve and ratify the above sale upon the terms stated and agree to carry it out.  (Signed) WALTER W. HALL, Purchaser.This agreement was carried out and the purchase price of $54,500 was placed by the petitioner in his personal account.  In 1914 the petitioner personally paid bills incurred by or on account of the Strand Theatre in the aggregate amount of $23,000.  Some years later, but prior to the time of the sale of Hall, the petitioner personally paid out $25,000 more on account of alterations and remodeling of the theatre.  *148  In 1919 the petitioner paid $4,800 to an architect for the preparation of plans for a theatre to be known as the Parkway, but the project was abandoned in 1921, and the building was not erected.  In June of 1920 the petitioner paid $4,000 to an architect for preparing plans for another theatre, but this project was abandoned in the fall of 1920.  Following an audit, the respondent determined that the petitioner had realized a profit amounting to $205,000 in 1920 from the sale of his stock of First National Pictures, Inc., and of the Orpheum Theatre Co.  No deduction*2477  was allowed for the $4,000 paid to the architect in that year.  For the year 1921, no deduction was allowed for the $4,800 paid to the architect in 1919 in connection with the project which was abandoned in 1921.  Thereafter, the petitioner filed a protest against the deficiencies asserted by the respondent.  In that protest the petitioner claimed, for the first time, a deduction of $162,500 as a loss sustained in 1920.  This loss was claimed on the ground that the Metropolitan Theatres Corporation had failed to give to the petitioner a note for that amount, as called for by the agreement of November 7, 1917.  This was disallowed by the respondent, following a conference in the respondent's office.  OPINION.  MARQUETTE: With reference to the deficiency asserted by the respondent against the petitioner for the year 1919, no evidence was offered.  The presumption that the deficiency was correctly asserted places upon the petitioner the burden of overcoming that presumption by competent evidence.  That burden has not been sustained in this instance, and we therefore approve the respondent's determination as to the year 1919.  The same is true as to the deficiency asserted for*2478  the year 1921, with this exception: At the hearing the pleadings were so amended as to raise an issue respecting the petitioner's right to a deduction, from gross income, of $4,800 paid out in 1919 on a project which was abandoned in 1921.  This amount was paid to an architect for his services in preparing plans for a new theatre which the petitioner then intended to build.  The building was not erected and in 1921 the petitioner abandoned the project.  Section 214(a)(4) of the Revenue Act of 1921 provides that in computing net income there shall be allowed as deductions: (4) Losses sustained during the taxable year and not compensated for by insurance or otherwise, if incurred in trade or business.  The amount thus expended for architect's services was an investment in a business enterprise, and became lost to the petitioner *149  when that enterprise was abandoned.  This Board has held that amounts so invested are allowable as deductions for losses in the year in which the enterprise is finally abandoned.  See, ; *2479 . In our opinion the petitioner should be allowed the deduction of $4,800 for loss sustained in 1921.  For the year 1920 a like condition appears.  The petitioner expended $4,000 for architect's services in preparing plans for a new theatre which was not built, and the entire project was abandoned during the same year.  The amount so expended should be allowed to the petitioner as a deduction for loss sustained in 1920.  Three more questions are presented respecting the petitioner's income for 1920.  The first is whether the total amount of $150,000 paid to the petitioner for 1,350 shares of First National Pictures stock should be included in petitioner's gross income.  The petitioner contends that, by reason of the decree of the Supreme Court of the District of Columbia as set forth in our findings of fact, only $75,000 of the sale price of the First National Pictures stock is chargeable to him; and he further contends that by reason of his assignment of interest in and to 85 per cent of the same corporate stock he can be taxed only on 15 per cent of such $75,000.  We are of opinion that the petitioner's contention on this*2480  point should be sustained.  It appears from the pleadings in the case above mentioned that the plaintiffs, minority stockholders of Moore's Theatres Corporation, claimed that the defendant, Fayette T. Moore, the petitioner herein, had wrongfully secured from the Moore's Theatres Corporation the shares of stock in question and had converted to his own use money of the corporation; that he had sold said shares of stock for $150,000 and from such money, and the money of the corporation he had wrongfully converted to his own use, had expended $75,000 in purchasing a note and deed of trust that had been executed by Moore's Theatres Corporation to one Lanning, and that he held said note and deed of trust for the benefit of the corporation.  The plaintiffs prayed that the defendant Fayette T. Moore be enjoined from foreclosing, or causing to be foreclosed, the said deed of trust securing said note and for an accounting between Fayette T. Moore and Moore's Theatres Corporation.  The court decree recites that during the pendency of the case the defendant Fayette T. Moore canceled said note and deed of trust and the court approved "the division made by the defendant Fayette T. Moore of the One*2481  Hundred and Fifty Thousand ($150,000) Dollars received from the First National Exhibitor Circuit, Inc.," and ordered that entries be made on the corporation's books to show that the amount of $75,000 had been paid to it as of November 9, 1920, *150  and that said amount had been used for the payment of the trust note.  The court also gave judgment against the defendant Fayette T. Moore for the additional amount of $12,346.15.  We are constrained to hold that the effect of said judgment was that as between Fayette T. Moore and Moore's Theatres Corporation, Moore was entitled to only one-half of the proceeds of the sale of the stock mentioned, and that he should be required to account only for that amount.  With reference to the effect to be given to the "Assignment of Interest" in and to 85 per cent of the First National Pictures stock owned by the petitioner, we are of opinion that the petitioner intended to convey, and that by the instrument did convey, to his wife, his mother, and his sister, 85 per cent of his interest in and to the stock mentioned herein, reserving to himself, however, the right to act as the agent for his wife, his mother and his sister in the management*2482  or subsequent sale of the stock.  We are of opinion that the instrument effected the result for which it was intended and that the petitioner thereby divested himself of ownership of 85 per cent of his interest in the stock in question, and that upon the subsequent sale of the stock only 15 per cent of the proceeds, that is, 15 per cent of $75,000, belonged to him.  The next question is whether the petitioner sustained a loss amounting to $162,500 in 1920.  In November, 1917, this petitioner executed an agreement whereby he was to transfer to the Metropolitan Theatres Corporation certain real estate, and certain corporate stocks in three separate companies.  In return he was to receive all the capital stock of the Metropolitan Corporation, $137,500 in cash, and the Metropolitan Corporation's promissory note for an amount not specified in dollars but which other evidence shows to have been $162,500.  The corporate stocks which the petitioner thus agreed to sell were worth $300,000 and had cost him that amount.  The agreement was signed and sealed both by the petitioner and the other parties thereto.  The petitioner transferred the land and part of the corporate stock, and received*2483  $137,500 in cash and all the capital stock of the Metropolitan Theatres Corporation.  He did not receive the latter company's note for $162,500 and for that reason he did not transfer some of the corporate stock called for by the agreement.  He has never received either the note or the money which it was to represent.  It is now claimed that the petitioner's right to collect the $162,500 became barred by the statute of limitations in 1920 and that he therefore suffered a deductible loss in that year.  The instrument relied upon by the petitioner was executed in the District of Columbia and was there to be carried out.  Section 1265 of the Code of Laws of the District of Columbia provides, among *151  other things, that: "No action shall be brought * * * on any * * * bond or single bill, covenant, or other instrument under seal after twelve years after the accruing of the cause of action thereon." It would seem apparent, therefore, that the petitioner's right of action against the Metropolitan Corporation did not become barred in 1920, three years after the earliest date when such right of action could possibly have accrued.  In addition to that, it appears that in 1919 the*2484 Metropolitan Corporation returned to this petitioner the corporate stocks which he had transferred to it in November, 1917.  The evidence gives no indication that the petitioner returned to the Metropolitan Corporation any part of the $137,500 which it had paid him in 1917 as part consideration for the corporate stocks.  The petitioner thus possessed, in 1919, all the corporate stocks which he testifies were worth $300,000 and he also had $137,500 received in partial payment for those stocks.  We fail to see wherein he suffered any loss in 1920; and his claim for allowance of a deduction of $162,500 from his gross income for that year on account of such alleged loss should be denied.  As to the final question for our consideration, it appears that in 1920 the business, leases, furniture, etc., of the Strand Theatre were sold by the Orpheum Theatre Co. for $54,500, and the petitioner also transferred to the buyer all the Orpheum Co.'s stock.  It alsp appears that he had in prior years advanced monies in behalf of the Orpheum Theatre Co. in the aggregate amount of $48,000.  The petitioner testified at the hearing that of this total only $5,700 had been repaid to him, leaving $42,300*2485  still unpaid at the time he sold his stock in the company.  He contends that he is entitled to deduct this $42,300 from the amount he received, $54,500, and that he is properly taxable only upon the difference, amounting to $12,200.  The respondent has determined that the entire amount of $54,500 should be taxed as profit.  The cost of the stock, to the petitioner, is not shown.  Neither is there any evidence as to the cost of the furnishings, etc., of the Strand Theatre.  The evidence respecting a debt due the petitioner from the Orpheum Theatre Co. consists entirely of statements made by the petitioner himself, and those statements are conflicting.  In 1920, at or about the time of the sale, the petitioner, as president of the Orpheum Co., made a writeen guaranty that "there are no debts, claims, liens, or other incumbrances, against the property sold," and that the Orpheum Co. had the right to convey the property sold.  At the hearing of this proceeding he testified that when the property was sold in 1920 the company owed him $42,300.  The petitioner did not ask any deduction from his gross income on account of this *152  alleged debt in his tax return for 1920.  In our*2486  opinion the evidence produced is not sufficient to overcome the determination of the respondent that the entire amount of $54,500 should be treated as profit.  Reviewed by the Board.  Judgment will be entered under Rule 50.SMITH, STERNHAGEN, VAN, FOSSAN, and BLACK dissent.