Court Opinion

ID: 4589011
Source: CourtListenerOpinion
Date Created: 2020-11-20 18:43:19.026975+00
Date Added: 2024-06-11T07:50:11.015958
License: Public Domain

MRS. NIELS (MELLIE) ESPERSON, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Esperson v. CommissionerDocket No. 7376.United States Board of Tax Appeals13 B.T.A. 616; 1928 BTA LEXIS 3218; September 27, 1928, Promulgated *3218  1.  Purported sale of stock by petitioner's husband, in which she held a one-half interest as community property, for the purpose of establishing a loss for income-tax purposes, held not to have been a bona fide sale.  2.  Evidence held insufficient to justify the conclusion that petitioner's return in which the loss was taken as a deduction, was wilfully false and fraudulent.  B. F. Louis, Esq., for the petitioner.  Bruce A. Low, Esq., for the respondent.  LITTLETON*616  The Commissioner determined a deficiency in income tax for 1921, in the amount of $59,823.40.  *617  It is claimed that the Commissioner erred in disallowing the petitioner one-half of a loss sustained by herself and her husband, Niels Esperson, in October, 1921, on the sale of 8,100 shares of stock in the Invincible Oil Corporation, the total amount of the alleged loss which was $163,033.44, and this petitioner's one-half thereof being $81,516.72.  The Commissioner's ground for disallowing the claim for the loss was that the alleged sale of said stock was not a bona fide sale.  There is no controversy in regard to the cost of said stock, or the price*3219  obtained, if in fact an actual sale was made.  FINDINGS OF FACT.  Petitioner is a resident of Houston, Tex., and in 1921 was the wife of Niels Esperson, and as such wife had a one-half community interest in the 8,100 shares of stock here involved.  Niels Esperson died October 21, 1922, and this petitioner thereafter married one Stewart.  In 1921 petitioner and her husband, Niels Esperson, owned 8,100 shares of Invincible Oil Corporation stock which they had theretofore purchased, and which, since its purchase, had greatly declined in market value.  In October, 1921, Niels Esperson, being then in Chicago, called at the brokerage house of E. F. Leland & Co.  He was well acquainted with H. B. Signor, a partner in that company, and at that time made and left with Signor, as a representative of that firm, an order to sell 8,100 shares of Invincible Oil Corporation stock; also an order to buy the same number of shares of said stock to be issued to Charles W. Brown and Gust H. Peters.  Peters was Esperson's secretary and Brown was Esperson's brother-in-law.  Neither Peters nor Brown at that time had an account with the Leland firm, nor did either of them have any financial standing*3220  with it.  Petitioner conceded that such sale was made for the purpose of taking a loss on the income-tax returns of himself and wife.  E. F. Leland & Co. carried out those orders through the New York Stock Exchange.  The following is a report of the sale of said stock (immaterial items omitted) made by E. F. Leland & Co. to Niels Esperson: E. F. LELAND & COMPANYNIELS ESPERSON, DEAR SIR: We have this day SOLD for your account and risk according to the rules of the New York Stock ExchangeChicagoCredit deliveryNumberDescriptionPriceSoldshares throughOct. 20, 1921Oct. 21, 1921300Invincible11 1/4Horton.300 do10 7/8Ware & T.200 do11Ware & T.500 do10 7/8Orvis.Oct. 19, 1921Oct. 20, 1921300 do11 1/4Horton.200 do10 3/4Horton.200 do11Horton.Oct. 26, 1921Oct. 27, 1921100 do10 3/4Whitney.Oct. 19, 1921Oct. 20, 1921200 do11 1/8Williston.700 do11Williston.100 do10 7/8Williston.Oct. 19, 1921Oct. 20, 1921700 do11 1/4J. F. Clark.300 do11J. F. Clark.Oct. 18, 1921Oct. 19, 1921300 do11 1/8Whitney.200 do11 3/8Whitney.100 do11 5/8Bernstein.400 do11 1/2Bernstein.Oct. 18, 1921Oct. 19, 1921900 do11Clark Childs.100 do11 1/8Clark Childs.Oct. 17, 1921Oct. 18, 1921100 do11Whitney.200 do10 7/8Whitney.200 do11 1/2Whitney.500 do11 1/2Whitney.500 do11 1/2J. J. Danzig.100 do11 1/2Williston.400 do11 1/4Williston.*3221 *618  Respectfully yours, E. F. LELAND & CO.E. F. Leland & Co. sent their check for the proceeds of that sale, less commissions and transfer tax, to Niels Esperson.  The following is the report of E. F. Leland & Co. to Gust H. Peters of the purchase of stock for him: No. 6764.  E. F. LELAND & CO., Chicago, 11/9/21.GUS H. PETERS.  DEAR SIR: We herewith hand you by registered mail securities as listed below: No. AmountDescriptionName7653/54200Invincible OilGus H. Peters.7540/42300 do Do.7522/311000 do Do.7473/821000 do Do.7315/19500 do Do.7881/901000 do Do.Yours truly, E. F. LELAND & CO.The following statements were made by E. F. Leland & Co. to Brown and Peters: E. F. LELAND & COMPANYCHAS. W. BROWN, DEAR SIR: We have this day BOUGHT for your account and risk according to the rules of the New York Stock Exchange: ChicagoDebit deliveryNumberDecriptionPriceBoughtshares throughOct. 19, 1921Oct. 20, 1921700Invincible11 1/4J. F. Clark.300 do11J. F. Clark.Oct. 19, 1921Oct. 20, 1921200 do11 1/8Williston.700 do11Williston.100 do10 7/8Williston.Oct. 26, 1921Oct. 27, 1921100 do10 3/4Whitney.Oct. 20, 1921Oct. 21, 1921300 do11 1/4Horton.300 do10 7/8Ware & Tranter.200 do11Ware & Tranter.500 do10 7/8Orvis Bros.Oct. 19, 1921Oct. 20, 1921200 do11Horton.300 do11 1/4Horton.200 do10 3/4Horton.*3222  Respectfully yours, E. F. LELAND & CO.*619 E. F. LELAND & COMPANYGUS H. PETERS, DEAR SIR: We have this day BOUGHT for your account and risk according to the rules of the New York Stock Exchange: ChicagoDebit deliveryNumberDecriptionPriceBoughtshares throughOct. 18, 1921Oct. 19, 1921100Invincible11 1/8Clark Childs.900 do11Clark Childs.Oct. 18, 1921Oct. 19, 1921300 do11 1/8Whitney.200 do11 3/8Whitney.100 do11 5/8Bernstein.400 do11 1/2Bernstein.Oct. 17, 1921Oct. 18, 1921100 do11Whitney.200 do10 7/8Whitney.200 do11 1/2Whitney.500 do11 1/2Whitney.500 do11 1/2J. J. Danzig.100 do11 1/2Williston.400 do11 1/4Williston.Respectfully yours, E. F. LELAND & CO.Niels Esperson approached Brown and Peters in October, 1921, and informed them of his intention to have purchased for them 8,100 shares of the Invincible Oil Corporation stock and that he would loan them the money to buy the same, and they assented.  After the purchase by E. F. Leland & Co., that company sent*3223  to Brown and Peters, each, a bill for the purchase price of amount purchased by each, plus commissions, and in payment therefor Niels Esperson made his check payable to Brown and Peters, respectively, for the purchase price of each one's stock and they in turn indorsed such checks and sent same to E. F. Leland & Co.The certificates of stock made to Brown and Peters, respectively, were sent by E. F. Leland & Co. to Brown and Peters, respectively, and the purchase price therefor was charged against them, each, on the books of Niels Esperson.  The certificates were then endorsed by Brown and Peters, respectively, and delivered to Esperson as collateral.  Esperson thereafter used them as collateral to secure advancements *620  made to him by E. F. Leland & Co. and they were so held by Lampson Brothers & Co., successors to E. F. Leland & Co., at the date of Esperson's death.  About July, 1923, the petitioner, as executrix, proposed to Brown and Peters to take back the Invincible Oil Corporation stock standing in their respective names and cancel the charge standing on the books against them.  They each assented and this was done.  Neither Brown nor Peters had paid any amount*3224  on such indebtedness.  The following was stipulated into the record of this case and shows the quotations of the Invincible Oil Corporation stock on the New York Stock Exchange on the dates therein indicated: DateSalesFirstHighLowClosingOct. 17, 192113,0001111 7/810 3/411 1/4Oct. 18, 19218,80011 3/411 3/410 3/411Oct. 19, 192111,50011 1/811 1/410 3/411Oct. 20, 19216,800111110 3/410 3/4Oct. 21, 192216 3/416 7/816 5/816 3/4July 2, 19231010 9 7/810July 3, 19231010 9 7/8 9 7/8July 4, 1923HolidayJuly 5, 19231010 9 3/4 9 7/8July 6, 1923 9 7/810 3/89 7/810July 7, 1923 9 7/8 9 7/8 9 7/8 9 7/8July 8, 1923SundayJuly 9, 192310 1/410 1/41010July 10, 192310101010July 11, 192310 1/810 1/81010July 12, 1923No transactionsJuly 13, 192310 1/810 1/810 1/810 1/8July 14, 192310 1/410 3/810 1/410 3/8July 15, 1923SundayJuly 16, 192310 1/810 1/81010July 17, 1923No quotationsJuly 18, 192310101010July 19, 192310 1/810 3/410 1/810 1/2July 20, 192310 1/210 5/810 1/210 1/2July 21, 192310 1/210 1/210 1/410 1/4July 22, 1923SundayJuly 23, 1923No salesJuly 24, 192310 1/410 1/410 1/810 1/8July 25, 192310 1/810 1/810 1/810 1/8July 26, 192310 1/810 3/810 1/810 1/8July 27, 192310101010July 28, 1923 9 7/810 9 3/4 9 3/4July 29, 1923SundayJuly 30, 1923 9 5/8 9 5/8 9 1/2 9 1/2July 31, 1923 9 1/2 9 1/2 9 9Dec. 10, 192311 1/411 1/410 3/411Dec. 11, 1923111110 3/410 7/8Dec. 12, 192310 7/810 7/810 3/410 7/8Dec. 13, 192310 3/41110 3/411Dec. 14, 19231111 3/810 7/810 7/8Dec. 15, 192311 3/812 1/211 1/412 3/8Dec. 16, 1923SundayDec. 17, 19231314 1/21314 1/8Dec. 18, 192314 1/814 1/213 5/814Dec. 19, 19231414 3/813 7/814Dec. 20, 192314 3/815 1/214 3/814 3/4Dec. 21, 192315 1/815 3/414 7/815Dec. 22, 192315 1/815 3/81515 1/4Dec. 23, 1923SundayDec. 24, 19231515 5/81515 3/8Dec. 25, 1923XmasDec. 26, 192315 5/816 3/815 5/816 3/4Dec. 27, 192316 7/817 3/416 1/217 3/4Dec. 28, 192317 3/417 3/416 7/817 1/4Dec. 29, 192317 3/817 3/417 1/417 1/2Dec. 30, 1923SundayDec. 31, 192317 3/417 1/216 3/816 7/8*3225 *621  Before entering into the transaction above referred to, Niels Esperson told petitioner that he was going to sell the stock in question for the purpose of taking a loss and that he was going to lend Peters and Brown money with which to buy stock of the same kind.  Petitioner had no objection to the proposed action on the part of her husband.  OPINION.  LITTLETON: The first question involved in this case is whether in October, 1921, Niels Esperson made a bona fide sale of 8,100 shares of Invincible Oil Corporation stock.  This issue was likewise before us today on the basis of the same facts, in the case of , wherein we held that the sale was not bona fide and, therefore, a loss on account thereof could not be allowed.  That decision is, of course, controlling in the case at bar.  But we are not convinced that when this purported sale was being carried out by Niels Esperson, the knowledge, acquiescence and part played by the petitioner, his wife, were sufficient to justify the conclusion of fraud on her part and, accordingly, the motion of the respondent that the*3226  fraud penalty provided in section 250(b), Revenue Act of 1921, be asserted, is denied.  Reviewed by the Board.  Judgment will be entered for the respondent.LOVE dissents.