Court Opinion

ID: 4628462
Source: CourtListenerOpinion
Date Created: 2020-11-21 03:03:25.370045+00
Date Added: 2024-06-11T07:57:12.775168
License: Public Domain

REESE BLIZZARD, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Blizzard v. CommissionerDocket Nos. 13688-13690.United States Board of Tax Appeals16 B.T.A. 242; 1929 BTA LEXIS 2615; April 26, 1929, Promulgated *2615  No loss was sustained by the petitioner in 1922 from the transaction involved herein.  T. M. Mather, Esq., for the respondent.  MARQUETTE *242  These proceedings, which were duly consolidated for hearing and decision, are for the redetermination of deficiencies in income-tax asserted by the respondent in the amounts of $66.89 for the year 1922; $118.21 for the year 1923, and $248.35 for the year 1924.  The respondent also asserted a delinquency penalty of 25 per cent of the tax for each year.  The petitioner alleges that he sustained a net loss in 1922 due to the fact that certain shares of stock owned by him became worthless in that year, and that such net loss should be applied against his income for 1923 and 1924.  FINDINGS OF FACT.  The petitioner is an individual residing at Parkersburg, W. Va.  Between the years 1906 and 1912 the petitioner acquired 344 shares of the capital stock of the Green River Coal Mining Co., a corporation which owned large tracts of coal land in the State of Kentucky.  By the year 1922 the Green River Coal Mining Co. had become deeply involved financially; its property was heavily encumbered by bond issues, and its*2616  capital stock had no fair or actual cash value.  On November 15, 1922, the corporation conveyed all of its property to P. D. Neal, Samuel D. Brady, and T. J. Parrish, who on the same day executed a declaration of trust which is in part as follows: This Declaration of Trust, made this the 15th day of September, 1922, by and between P. D. Neal, Post Office, Parkersburg, West Va., Samuel D. Brady, Post Office, Fairmont, W. Va., and T. J. Parrish, Post Office, Clarksburg, W. Va., parties of the first part and all of the bondholders and stockholders of the Green River Coal Mining Company, a corporation under the laws of the State of West Virginia, as shown by the records of the said Company, as of this date, and the said records are hereby made part of this writing, parties of the second part.  WITNESSETH: That all of the property, consisting of coal lands and surface land, situate and being in the Counties of Ohio and Muhlenburg, in the State of Kentucky, conveyed by deed, executed by the said Green River Coal Mining Company to the parties of the first part, and bearing even date herewith, and the said conveyance is accepted by them, upon the following expressed trust, that is to say: *2617  That the parties of the first part accept, receive and agree to hold all of said property in trust, and for the use and benefit of the bondholders and stockholders *243  of the Green River Coal Mining Company, upon the following expressed terms and provisions, to-wit: - First: All funds received from whatever source and in whatever manner from the bondholders and stockholders of the Green River Coal Mining Company, or from the proceeds of the property conveyed by the said deed, bearing this date, either from sale or otherwise, shall first be applied by the parties of the first part, to the payment of taxes on the said property, to the expenses of carrying, holding, caring for and preserving the said property, and the payment thereof shall be first in priority over all other claims, demands or obligations, and the parties of the first part are to have full authority for contracting for the maintenance and preservation of the said property.  Second: All of the said property, conveyed by the said Green River Coal Mining Company to the parties of the first part, by the said deed, shall be held by the parties of the first part, for the full payment and liquidation of each and*2618  every one of the bonds of the Green River Coal Mining Company, secured by the indenture and mortgage of the said Green River Coal Mining Company, to the Commercial Banking & Trust Company, a corporation, Trustee, bearing date the 26th day of November, 1920, and of record in the office of the Clerk of the County Court of Ohio County, State of Kentucky, and also of record in the office of the Clerk of the County Court of Muhlenburg in the State of Kentucky, equally for the payment of all of the said bonds, without priority or preference of any one or more bonds, over other bonds, regardless of the holders of the said bonds, and regardless of the date of the issuance and delivery of the said bonds.  It being expressly understood and agreed that the bonds of the said Company, hereafter to be issued, shall have the same standing as to payment, as the bonds heretofore issued.  And out of the proceeds of any sale made of the said property, or any part thereof, the said bonds shall be paid in full or in proportion, according to the amount of the said proceeds received.  Third: After the costs of maintaining the said property, and the payment of all of the bonds issued, under the said mortgage, *2619  is fully paid, then the parties of the first part shall pay in full or proportionately, as the case may be, all of the stock issued by the said Company, and now held by its stockholders, together with 6 per cent dividends or interest on the said stock, from the date of issuance thereof, or full equality, without regard to the date of the issuance of the said stock, or the holders thereof.  Said property is still held by said trustees.  The Green River Coal Mining Co. was dissolved in 1922.  The petitioner in his income-tax return for 1922 deducted from gross income the amount of $34,500 as a loss on his shares of the capital stock of the Green River Coal Mining Co.  The respondent disallowed the deduction.  OPINION.  MARQUETTE: The testimony in this case, which was taken by deposition, is voluminous and, as we conceive the issue, much of it is irrelevant.  We have set forth in our findings above the facts we deem material.  The petitioner contends that he sustained a loss in 1922, due to the fact that the stock of the Green River Coal Mining Co. became worthless in that year, which he is entitled to deduct in computing *244  his net income.  While it is probably true*2620  that the stock had no fair market or actual cash value in 1922, we do not consider that there was any completed transaction which may be considered as giving rise to gain or loss within the meaning of the Revenue Acts.  The petitioner's rights in the property held by the trustees were identically the same rights in that property that were evidenced by the shares of the stock of the corporation.  Whether a gain or loss will be realized or sustained by the petitioner depends entirely upon the final disposition of that property.  Judgment will be entered for the respondent.