Court Opinion

ID: 4633895
Source: CourtListenerOpinion
Date Created: 2020-11-21 03:14:51.760414+00
Date Added: 2024-06-11T07:58:08.192341
License: Public Domain

HOWARD N. EAVENSON, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Eavenson v. CommissionerDocket Nos. 24754, 32851.United States Board of Tax Appeals20 B.T.A. 238; 1930 BTA LEXIS 2175; July 15, 1930, Promulgated *2175  The sale of certain stock was not consummated after December 31, 1921, and the profits therefrom are not taxable under the capital gain provisions of the Revenue Acts of 1921 and 1924.  Charles W. Dahlinger,20 B.T.A. 176">20 B.T.A. 176, followed.  W. W. Booth, Esq., and W. A. Seifert, Esq., for the petitioner.  Bruce A. Low, Esq., for the respondent.  MURDOCK *239  The Commissioner determined deficiencies in the petitioner's income taxes for the years and the amounts as follows: 1922$1,163.1819233,920.5419242,785.7219252,500.71The petitioner alleges that the Commissioner erred in refusing to tax the profit of $19,849.88, realized in each of the years under consideration from the sale of certain stock, under the capital gain provisions of the Revenue Acts of 1921 and 1924.  The case were consolidated.  FINDINGS OF FACT.  The petitioner is a resident of Pittsburgh, Pa.  He entered into a contract of sale which was in part as follows: MEMORANDUM OF AGREEMENT made this 17th day of November, 1920, between HOWARD N. EAVENSON, of Pittsburgh, Pa., party of the first part, hereinafter called the Seller, and*2176  ELKHORN COAL & COKE COMPANY, a West Virginia Corporation, party of the second part, hereinafter called the Buyer, and Seaboard National Bank, New York, hereinafter called the Trustee, WITNESSETH: The Seller has this day sold, transferred and delivered to the Buyer, Three Hundred and Forty-six (346) shares of the Capital Stock of the Central Pocahontas Coal Company, a West Virginia Corporation, the par value of said shares being One Hundred ($100.00) Dollars per share.  PRICE: The price to be paid for said stock by the Buyer is Two hundred and forty-two thousand, two hundred ($242,200.00) Dollars, being at the rate of Seven hundred ($700.00) Dollars per share.  PAYMENT: The Buyer has this day paid on account of the purchase price of said stock, in cash, receipt whereof is hereby acknowledged, the sum of Sixty thousand, five hundred and fifty ($60,550.00) Dollars.  The balance of One hundred and eighty-one thousand, six hundred and fifty ($181,650.00) Dollars, the buyer hereby agrees to pay in ten installments to the Seaboard National Bank, as Trustee, at 18 Broadway, New York City, each installment bearing interest at the rate of Six (6%) per cent per annum from even date, due*2177  on the following dates for the following amounts: May 17th, 1921$18,165.00November 17th, 192118,165.00May 17th, 192218,165.00November 17th, 192218,165.00May 17th, 192318,165.00November 17th, 192318,165.00May 17th, 192418,165.00November 17th, 192418,165.00May 17th, 192518,165.00November 17th, 192518,165.00$181.650.00In order to secure the payment of each of the above installments and interest as each becomes due, the Buyer has this day deposited with the Seaboard *240  National Bank, as Trustee, certificates of Central Pocahontas Coal Company Capital Stock, purchased from the Seller, aggregating Three Hundred and forty-six (346) shares, as collateral security.  Upon payment of each of the above installments and interest thereon, the Trustee will forward the amount of such payment to the Seller, and return to the Buyer Thirty-four (34) shares of said Capital Stock, together with Power of Attorney covering said Thirty-four (34) Shares, representing approximately one-tenth of amount of collateral deposited with the Trustee under this agreement as hereinafter stated.  The Seller will furnish the Trustee and Buyer duplicate*2178  receipts upon the payment of each installment made hereunder.  On the completion of the payment of all of the aforesaid installments and interest thereon by the Buyer, the Trustee shall deliver to the Buyer the remainder of the said certificates of stock held as collateral hereunder, at which time the Trustee shall also return to the Buyer the Power of Attorney, which shall be cancelled and the Trust shall thereafter be no longer in effect.  In the event of default on the part of the Buyer in making payment of any one of the said installments and interest when the same shall become due, and in case such payment is not made after thirty days notice of such default by the Trustee to the Buyer, the Trustee is then empowered to sell this stock at the highest market price obtainable in order to satisfy the total unpaid balance due the Seller, and any amount received in excess of said unpaid balance shall be returned to the Buyer.  The Buyer is entitled to all dividends, including stock dividends, which hereafter may become payable on this stock.  The Trustee shall be entitled to reasonable compensation for services rendered in execution of the Trust hereby created and the Seller and*2179  Buyer each agrees to pay one-half of such compensation, as well as one-half of the expenses reasonably incurred by the Trustee hereunder.  The Seaboard National Bank, as Trustee, hereby accepts the trusts in this Trust Agreement created and declared and agrees to perform the same upon the terms and conditions hereinabove set forth.  This contract was carried out in accordance with its terms.  The petitioner had owned the stock sold for more than two years prior to November 17, 1920.  The petitioner reported as profit on the above mentioned sale $19,849.88 in each of the years 1922 to 1925, inclusive, and computed the tax thereon at the rate of 12 1/2 per cent; the Commissioner included these installments with other income in each year and taxed the whole at the normal and surtax rates, thereby determining the deficiencies.  The sale of the petitioner's stock in the Central Pocahontas Coal Co. was not consummated after December 31, 1921.  OPINION.  MURDOCK: The issue in this case is not materially different from that presented in the case of *2180 , and in accordance with our decision in that case, we hold that the sale of the petitioner's stock in the Central Pocahontas Coal Co. was not consummated after December 31, 1921, and the profits therefrom *241  were not taxable under the capital gain provisions of the Revenue Acts of 1921 and 1924.  Judgment will be entered for the respondent.SEAWELL dissents.