Court Opinion

ID: 4626125
Source: CourtListenerOpinion
Date Created: 2020-11-21 02:58:33.98311+00
Date Added: 2024-06-11T07:56:49.493468
License: Public Domain

ROBERT BARBOUR, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Barbour v. CommissionerDocket No. 81059.United States Board of Tax Appeals39 B.T.A. 553; 1939 BTA LEXIS 1018; March 7, 1939, Promulgated *1018  1.  Where husband and wife separated and lived apart, in contemplation and anticipation of a divorce later obtained, and the husband, desiring to make provision for her maintenance and support so long as she should live, upon her agreement to accept the same in satisfaction of any and all claims that she might have against him or his estate, entered into an agreement with her to that effect, settling all property rights between them, and in furtherance of the agreement also created a trust in her favor to help satisfy and discharge his obligation to her, held, the income provided for her in the agreement and in the trust so created for her is taxable to him, since it discharges his duty and obligation made specific by his agreement to support her during her natural life.  2.  The record herein showing that at the date of the 1933 bank holiday and subsequent thereto in that year the capital of the Hamilton Trust Co., as shown by the examinations and appraisals of both Federal and state bank examiners, was greatly impaired and that its assets were insufficient to redeem even its preferred stock and insufficient by approximately the amount of $500,000 to meet its deposits, and*1019  there being no substantial evidence to the contrary, held, the common stock of the Hamilton Trust Co. became worthless in 1933.  Prew Savoy, Esq., John F. Evans, Esq., and Winthrop Travell, Esq., for the petitioner.  Gerald W. Brooks, Esq., and Irving M. Tullar, Esq., for the respondent.  DISNEY*554  This proceeding involves income tax liability for the years 1932 and 1933.  The Commissioner has determined a deficiency of $6,260.75 for the year 1932 and $5,260.14 for the year 1933.  The deficiencies are controverted by the petitioner, who requests a redetermination of the same.  On or about September 2, 1936, the petitioner filed a claim for the refund of taxes in the amount of $19,069.97, based upon alleged losses sustained by him in 1933, due to the ownership of common stock in the Harriman National Bank & Trust Co. of New York and the Hamilton Trust Co. of Paterson, New Jersey, which latter loss, due to oversight, he had not claimed as a deduction from gross income in determining his taxable income for 1933.  The respondent advised the petitioner that inasmuch as he had filed a petition with this Board for a redetermination of*1020  a proposed deficiency in tax for 1933 and the Board had jurisdiction to determine his tax liability for the year in issue, the issue of overpayment involved should be presented to the Board for its consideration.  An amended petition and several amendments thereto were filed by petitioner to conform to the proof developed at the hearing, and it was agreed that the respondent's answer would be considered amended so as to deny the amended allegations of the petition.  At the hearing, oral testimony and numerous documents and exhibits, together with a stipulation by the parties of certain agreed facts, were introduced in evidence.  Facts, as stipulated, are adopted as a part of our findings of fact, and, to an extent deemed necessary to an understanding and determination of the issues involved, are set forth herein, with other facts found by the Board on the record as submitted.  One issue presented by the pleadings has been settled by agreement of the parties, viz., that the petitioner, in computing his tax liability for 1933, is entitled, and we so determine, to a deduction of $1,512, the cost to him of one share of common stock of the Harriman National Bank & Trust Co. of New*1021  York City, which stock became worthless in the year 1933 and was a total loss to him in that year.  The two remaining issues to be determined by the Board are, as follows: (1) Whether there should be included in petitioner's gross income for the calendar years 1932 and 1933 sums of money paid to his former wife pursuant to an agreement between them dated April 8, 1925, a trust instrument of the same date made by him to the Hamilton Trust Co. of Paterson, New Jersey, and certain letters dated November 16, 1926, December 15, 1928, and December 16, 1929, hereinafter more fully described, and (2) whether the petitioner is entitled to a deduction from gross income for the year 1933 of *555  $36,650 representing a loss due to worthlessness of common stock of the Hamilton Trust Co. of Paterson, New Jersey.  In brief for the respondent it is stated that the parties, substantially, are in agreement as to the facts presented by the evidence.  They, however, disagree as to the legal consequences flowing from the facts shown by the record.  FINDINGS OF FACT.  The petitioner is an individual, with his principal office in Paterson, New Jersey.  He duly filed with the collector of internal*1022  revenue for the fifth district of New Jersey his individual Federal income tax returns for the calendar years 1932 and 1933.  Petitioner and Janet Brownell McClure were married in New York, New York, on April 22, 1922.  At the date of the marriage the petitioner was temporarily residing at 40 West 49th Street, New York City.  He had a residence and voted in Paterson, New Jersey, and had never left that state with an intent not to return.  The marriage was unfortunate from the start.  Petitioner was abroad for a time in 1924, returning the latter part of January 1925.  Shortly after his return, his wife visited her parents in Florida and during her absence he learned that she was in love with one Peter Vischer, a mutual friend, whom she subsequently married.  Upon her return from Florida she and petitioner discussed their marital differences and in March 1925 reached the conclusion that it was best for them to separate, and he proceeded to live apart from her.  He offered her a cash settlement of $100,000 for a release of all her property rights and interest in his estate.  The offer was not acceptable and petitioner "then offered her ten thousand dollars a year for life, which she*1023  accepted." Shortly after reaching such oral agreement, petitioner sold certain real property at Great Neck, Long Island, which he owned and had bought on January 14, 1924.  Janet McClure Barbour, his wife, joined in the deed conveying same.  Petitioner's equity in the property on March 10, 1925, the date of its sale, was approximately $100,000.  On April 8, 1925, petitioner owned securities and other personal property having a value in excess of $700,000.  On April 8, 1925, the petitioner and his wife entered into a written agreement, set out in full in a stipulation agreed to by the parties herein and filed in this proceeding, which agreement was "approved, ratified and adopted as the final settlement and disposition of the property rights of the respective parties" according to a recitation in a judgment and decree, entered on February 15, 1926, in the District Court of the Second Judicial District of Nevada, in and for the *556  County of Washoe, in the case of Janet B. Barbour, plaintiff, vs. Robert Barbour, defendant, which decree purported to dissolve absolutely and forever the marriage theretofore existing between Janet B. Barbour and Robert Barbour.  *1024  In the aforesaid agreement of April 8, 1925, Robert Barbour is referred to "as the party of the first part" and Janet B. Barbour "as the party of the second part", which agreement, in part, is as follows: WHEREAS, the party of the first part desires to make provision for the maintenance and support of the party of the second part so long as she shall live, upon her agreement to accept the same in satisfaction of any and all claims that she may have against him or his estate; Now, THEREFORE, in consideration of the mutual covenants and agreements herein, the parties hereto agree: 1.  The parties shall live separate and apart and each be free from the interference, authority and control by the other as fully as if he or she were sole and unmarried and each may conduct, carry on and engage in any employment, business or trade which to him or her shall seem advisable for his or her own sole and separate use and benefit without and free from any control, restraint or interference, direct or indirect, by the other party in all respects as if each were unmarried.  The party of the first part assigned, transferred, and paid over to the Hamilton Trust Co. of Paterson, New Jersey, the*1025  sum of $100,000, to be held by the trust company as trustee, to pay to the party of the second part the net annual income derived from the trust, not exceeding $5,000, for and during her natural life, "with the remainder upon the death of the party of the second part to the party of the first part, his executors, administrators and assigns." And the party of the first part convenanted for himself, his heirs, executors, and administrators, thereby binding his estate, if he should predecease the party of the second part, to pay to the party of the second part so long as she should live, "for her separate maintenance and support in addition to the income derived by said party of the second part from said trust fund, the sum of Five thousand ($5,000) dollars per annum in equal monthly payments beginning on the first day of May, One thousand nine hundred and twenty-five (1925)." The party of the first part also covenanted that he would see to it that the income from the Hamilton Trust Co. trust to be paid the party of the second part, if less than $5,000, would at the end of each fiscal year be by him made to equal $5,000.  The aforesaid agreement between the Barbours also contained*1026  the following provisions: The obligation of the party of the first part to make financial provision for the party of the second part in amount and manner hereinabove provided for, shall survive and be unaffected by any judgment or decree by which the marital ties of the parties hereto may at any time be severed, provided that *557  if any such judgment or decree be entered, no provision shall be made for the support and maintenance of the party of the second part other than as provided in this agreement.  * * * The party of the second part agrees that she does hereby release, and that she will release her right of dower in any land or real estate of which the party of the first part may now be or may hereafter become seized or possessed and that she will execute, acknowledge and deliver, at the request of the party of the first part, or his legal representatives, without cost or expense to her, all such deeds, releases or other instruments as may be necessary to bar, release or extinguish such right of dower.  Except as herein provided, the party of the second part hereby releases all of her interest in, or her right or claim to the separate estate of the party of the*1027  first part.  * * * The parties hereto covenant and consent that in the event a temporary or final judgment or decree should be rendered in any action or proceeding between the parties hereto in which provision for the maintenance and support of the party of the second part may be appropriate, such judgment or decree may provide for the maintenance and support of the party of the second part according to the terms of this agreement and not otherwise, and this agreement may be embodied in and made a part of such judgment or decree and the party of the first part shall always be credited with the executed portion thereof, and such judgment or decree shall not provide for the payment of any sums for the maintenance and support of the party of the second part by the party of the first part in excess of the sum of Five thousand ($5,000) dollars per annum * * *.  On the same day, April 8, 1925, that the aforesaid separation agreement between petitioner and his wife, Janet B. Barbour, was executed, petitioner, pursuant to same, assigned, transferred, and paid over to the Hamilton Trust Co. of Paterson, New Jersey, as trustee, $100,000 for it to invest and reinvest same and pay to Janet*1028  Barbour the net income in equal monthly payments to the extent of $5,000 per annum and no more, and upon the death of said Janet Barbour to transfer and pay over the principal to Robert Barbour or to his executors, administrators, or assigns.  The trust instrument contained, as did the separation agreement between petitioner and his wife, the following paragraph: This trust shall continue for and during the term of the natural life of the beneficiary, whether or not any judgment or decree be entered or made dissolving or annulling the marital status of the party of the first part and the beneficiary.  On January 9, 1926, Janet B. Barbour filed against her husband, Robert Barbour, a bill for divorce and on February 15, 1926, obtained, in the aforesaid District Court of the Second Judicial District of the State of Nevada in and for the County of Washoe, a judgment and decree granting divorce and approving, ratifying, and adopting the *558  separation agreement of April 8, 1925, as heretofore herein indicated.  On February 16, 1926, Janet Brownell Barbour married Peter Vischer in San Francisco, California.  On November 16, 1926, petitioner wrote a letter addressed to "Mr. *1029  H. H. Parmelee, H. H. Parmelee, The Hamilton Trust Co., Paterson, N.J.", confirming the fact that he had delivered to him 2,061 shares of the common stock of the United Shoe Machinery Corporation, 2,000 shares of which were to be transferred to the name of the Hamilton Trust Co. and 61 shares held at the Hamilton Trust Co. for him.  The dividends paid on the stock up to a sum not to exceed $5,000 a year were directed to be paid in 12 monthly payments to Janet b. Vischer (formerly wife of petitioner) and any dividends on the stock in excess of $5,000 a year were to be paid to petitioner.  The letter to Parmelee stated: "These instructions are irrevocable and will remain in force until the death of Janet B. Vischer or until January 1st, 1928.  At such time you will receive further instructions in reference to the disposition of this stock." On December 15, 1928, petitioner again wrote a letter, addressed to said Parmelee, as was the letter above described, in which last letter petitioner referred to his letter of November 16, 1926, concerning the 2,000 shares of United Shoe Machinery Corporation common stock and requested Parmelee to continue to pay the dividends thereon to Janet*1030  B. Vischer up to not exceeding $5,000 a year, and any dividends on the stock in excess of $5,000 a year were directed to be paid petitioner.  The letter contained the statement: "These instructions are irrevocable and will remain in force until the death of Janet B. Vischer or until January 1, 1930", at which time further instructions would be received.  On December 16, 1929, petitioner again wrote Parmelee a letter similar to the two previous letters mentioned, directing that the dividends on said stock should be paid as theretofore directed, closing his letter with the statement: "These instructions are irrevocable and will remain in force until the death of Janet B. Vischer." In 1933 petitioner was the owner of 150 shares of the common stock of the Hamilton Trust Co., which had cost him $36,650.  In March 1933 the petitioner was in Europe.  He returned on April 19, 1933, and at that time was a depositor and stockholder in the Hamilton Trust Co. which was closed during the bank holiday of 1933.  He was fully advised with respect to the condition of the Hamilton Trust Co., and anticipated a loss with respect to his deposits, believing that the assets of the Hamilton Trust Co. *1031  were insufficient to meet deposits by about a half million dollars and that there were not sufficient assets to support the common stock.  After the bank holiday of March 4, 1933, certain banks which were considered sound banks were permitted to reopen.  The Hamilton *559  Trust Co. was licensed to reopen on June 21, 1933, and to perform its usual banking functions, except to the extent prohibited in the executive orders of the President of the United States or by regulations of the Secretary of the Treasury.  Prior to reopening for business on June 21, 1933, it operated on a somewhat restricted basis under what was known as the Altman Act, a New Jersey statute, requiring, in part, that new funds received by the Hamilton Trust Co. be segregated and held as trust funds.  On March 31, 1933, an examiner for the Federal Reserve Bank of New York examined the Hamilton Trust Co. and appraised its assets, his survey showing that the assets were insufficient to meet the deposits by approximately $600,000 and that the common stock of the Hamilton Trust Co. as of that date was worthless.  An examiner of banks for the State of New Jersey made an appraisal of the assets of the Hamilton*1032  Trust Co. as of April 10, 1933, and his survey also showed insufficient assets to meet deposit liabilities by the sum of about $549,000.  His survey showed there were no assets to support or give the common stock any value in case of liquidation.  It was recognized by directors and stockholders of the Hamilton Trust Co., and is so shown by the record herein, that large additional funds were required to put the institution in satisfactory condition to reopen and operate on an unrestricted basis.  A plan was submitted to the depositors and was adopted, pursuant to which the depositors agreed to give up, and gave up, 30 percent of their deposits, or $1,725,000, and received therefor preferred stock having a par value of $10 per share, a total of $575,000, but redeemable at $30 per share, a total of $1,725,000.  The common stock was not wholly eliminated, but was carried at $1 value, the board of directors on June 19, 1933, having authorized the officers to charge capital stock, then $750,000, the sum of $749,999 and credit to profit and loss the latter amount, which action was taken at the request of the Department of Banking and Insurance at Trenton, New Jersey.  The petitioner*1033  was advised with respect to the plan adopted for resuming unrestricted business by the Hamilton Trust Co. and agreed to the plan by giving up 30 percent of his deposit.  Upon the adoption of the plan and pursuant to license issued to it by the Secretary of the Treasury, the Hamilton Trust Co. on June 21, 1933, reopened for business and is still operating.  Soon after the Hamilton Trust Co. reopened, it announced to the public that it resumed full operations on June 21, 1933, and that it had undergone a process of renovation in accordance with the exacting requirements of both Federal and state banking authorities and that it "stands today as one of the strongest banks in this section of the country." *560  On or about June 21, 1933, the petitioner exchanged the 150 shares of common stock of the Hamiton Trust Co., which had a par value of $100 and had cost him $36,650, for 1,500 shares of common stock of the Hamiton Trust Co., having a par value of $10 each.  Since June 21, 1933, the record shows there have been a few transfers of the common stock of the Hamilton Trust Co. among relatives, business associates, or from or to bank officers, but at rather nominal prices; some*1034  at 10 cents a share and some at 2 1/2 cents a share.  The common stock was to receive no dividends until after dividends had been paid on the preferred stock and 50 percent of the earnings had been set aside to redeem the preferred stock.  The common stock, however, carried voting rights, but no fair market value at any time is shown for the common stock.  OPINION.  DISNEY: It is not disputed by petitioner that the amount of $10,000 was received in each of the years in issue, 1932 and 1933, by petitioner's former wife as the result of the aforesaid separation agreement - adopted and ratified by the Nevada court in its divorce decree - as well as the Hamilton Trust Co. trust heretofore described.  The petitioner contends that the amounts should not be included in his gross income for purposes of Federal income tax in the years in issue, for the reason that the separation agreement of April 8, 1925, was purely a property settlement and not an agreement to pay alimony, and, since the Nevada court adopted the provisions of the separation agreement, its decree did not grant alimony, but merely provided for a division of property between them, alimony not being mentioned or involved*1035  and, therefore, the income received by the wife or beneficiary of the agreement and trust should not be included in the petitioner's income.  Briefly, and as stated by petitioner, the payments made to petitioner's former wife "are not in satisfaction of the legal obligation to pay alimony, or of any other obligation such as to require that the amounts so paid be included in petitioner's gross income for 1932 and 1933." In considering and discussing the above issues, counsel for petitioner presents and presses numerous arguments, all of which we have carefully considered, though only such as in our opinion are important and material in determining the issues are herein discussed.  In the instant case the petitioner's attitude and arguments are the same or similar to those presented by the petitioner in the case of , the decision in which was reversed, the court saying, in part, in : The Board's decision was rendered prior to the Supreme Court's opinion in *1036  L.Ed.  , which the *561  commissioner contends is conclusive in his favor.  The taxpayer argues that there is a distinction between an agreement to pay alimony and an agreement for the settlement of property rights between husband and wife.  The asserted distinction is without substance on the present issue.  Whether the trust income is used to discharge the husband's duty, made specific by agreement, to support the wife, or to discharge an obligation to pay her agreed sums for a release of rights in his property, cannot be material in determining the taxability of the husband.  The creation of a trust the income of which is to be used to discharge any legal obligation of the settlor enables him to enjoy the benefit of the income; hence the income is properly taxable to him.  Compare ; ; ; *1037 , all of which have been recently decided on the authority of Douglas v. Willcuts.Indeed, in the Douglas Case itself the trust provisions for the wife were in settlement not only of alimony but also "of any and all dower rights or statutory interests in the estate" of the husband, and the court pointed out ( L.Ed.  ) that this did not affect the essential quality of the payments. In , the petitioner therein also argued that a distinction must be made between agreements for settlement of property rights and agreements contemplating divorce for the purpose of discharging a husband's family obligations.  In its decision therein, the Board said, in part: * * * If any such distinction can be drawn from the decided cases it can not be made here.  * * * Moreover, the language of the agreements here definitely establishes that they were entered into for the specific purpose of providing for the support of the petitioner's wife and children.  * * * In the instant case, the separation*1038  agreement recites that it is the desire of the husband, the petitioner, "to make provision for the maintenance and support" of his wife "so long as she shall live." The separation agreement and the trust instrument executed pursuant thereto both recognize the purpose and duty of petitioner to maintain and support his wife during the term of her natural life.  The agreement provided that the obligation of the petitioner to make financial provision for his wife as indicated therein should "survive and be unaffected by any judgment or decree by which marital ties of the parties" might "at any time be severed," and the trust was to likewise so continue "whether or not any judgment or decree be entered or made dissolving or annulling the marital status" of the parties.  It is evident, therefore, that the amounts paid in accordance with the terms of the separation agreement and the trust and received by petitioner's former wife during the years 1932 and 1933 were intended to and did satisfy and discharge an obligation of petitioner.  In *1039 , we held, in substance, that income from a trust paid to a divorced and remarried *562  wife is taxable to the husband who created the trust, under the terms of the trust agreement, even though, in the absence of such agreement, his obligation to support and maintain his wife would have been terminated, under the law of Pennsylvania, by her divorce and remarriage.  In brief of petitioner it is insisted that our decision therein is clearly wrong, but we are convinced of the correctness of our determination and the same has been affirmed by the . It is also insisted in behalf of the petitioner in the instant case that for the same reasons assigned in the Glendinning case, supra, the decision of the Circuit Court of Appeals of the Third Circuit in the case of , is likewise wrong.  We, however, are not convinced of any error therein and quote briefly, as pertinent and appropriate, from the court's decision affirming the determination of the Board, as follows: "It may seem*1040  hard that the petitioner must pay taxes on the income which supports another man's wife, but it is a condition for which he is responsible and which he created as a substitute for his obligation to support her." The United States Supreme Court denied application therein for certiorari, . The petitioner further contends that since the agreement of separation entered into by the petitioner and his former wife on April 8, 1925, was an agreement to facilitate a divorce, the divorce decree was collusive and, therefore, invalid.  Consequently, the petitioner argues, the payments received by the petitioner's former wife under the trusts created to carry out the separation agreement and the decree are not in satisfaction of a legal obligation.  Such an argument is clearly and concisely answered by the Circuit Court of Appeals for the Second Circuit in its decision in the case of , reversing . In that case Hyde and his wife entered into an agreement on October 29, 1918, reciting that they were living apart and contemplated divorce.  A trust instrument was signed by both parties and*1041  the wife released all claims for alimony, dower, support, and maintenance.  In these respects the facts are similar to those in the instant case.  The court held that the payments by the trusts were income to Hyde, and, in answer to the argument that the agreement was invalid since it was one for promoting divorce, said: Obviously the argument is highly technical.  The husband has had the full benefit of the agreement, whether valid or not.  But for his promise to create the trust, the wife would undoubtedly have asked for and obtained in her decree of divorce terms providing for alimony for herself and support for their child.  Both parties have performed the agreement and equity would leave them where it finds them, even if the agreement were illegal.  See . The trust indenture itself contains a relinquishment by the wife of all claims for support and dower and an agreement by her *563  to execute such further instruments as may be necessary to effectuate such relinquishment.  Under such circumstances to hold that the trust was established as a voluntary gift and that the trust income has not been used*1042  to satisfy the husband's obligation of support would be to close one's eyes to the realities.  In substance the situation is no different than in Helvering, Commissioner, v. Brooks.Petitioner also contends that the divorce decree was invalid, and in effect that the duty of support of wife continued until her remarriage, but that thereafter there was no such duty and therefore from that date the trust income was not taxable to him; and that, in the absence of a valid decree of divorce adopting the agreement between the parties, such agreement would be effective only until the remarriage of the wife, because dependent upon the duty of support.  In , the court denied validity to an attempted distinction between an agreement to pay alimony and an agreement for property settlement.  Therefore, we consider the agreement for property settlement sufficient, even in the absence of a valid decree of divorce, to serve as the basis for the trust agreement between husband and wife; and in *1043 , we held that a predivorce agreement, not dissimilar to the agreement here involved, created an obligation subjecting the husband to payment of income tax upon the income of the trust, though the wife had remarried after divorce.  In  (548-549), we considered the effect of a trust agreement before divorce, followed by divorce and remarriage of the wife, beneficiary under the trust, and held that there was such continuing obligation on the part of the husband to support his former wife as to subject him to income tax upon the trust property.  The agreement herein involved was made under circumstances, and in terms, plainly indicating intent to provide for the wife for life, in spite of the fact that discontinuance of marital duties on her part and the possibility of marriage by her to another were obviously taken into consideration.  The agreement under such circumstances having been made in consideration of her release of any and all claims on her part against her husband or his estate, including, of course, right to continued support, which she might, or might not, otherwise*1044  have surrendered, we conclude that any invalidity of divorce and the fact of remarriage do not suffice to relieve the husband from obligation to pay income tax upon the trust income.  In our opinion and we so hold, the amounts so paid were in satisfaction and discharge of a legal obligation of petitioner and are, therefore, taxable to him.  In addition to authorities already quoted or cited in support of our determination, see also the following: ; ; ; ; ; , and , wherein we pointed out that: The Supreme Court held a settlor of a trust taxable with the trust income where it was used to pay his debts in , in reversing the *1045 ), and where it was used to discharge his obligation to maintain and support his minor children in , in reversing the ), and in , in reversing the Third Circuit (79 Fed,(2d) 256), and where the beneficiary of a trust irrevocably assigned a part of the trust income to his wife who subsequently obtained a divorce in which the decree made no provision for alimony in , in reversing the ). Cf. ; affd., . With respect to the deduction claimed by petitioner on account of his Hamilton Trust Co. common stock becoming worthless in 1933 - which deduction was disallowed by the respondent - the latter in his brief presents no argument to support his disallowance, but simply submits that issue to the Board on the basis of the evidence presented.  There is no occasion for any lengthy discussion of this issue, which involves*1046  150 shares of the common stock of the Hamilton Trust Co. of Paterson, New Jersey.  It is stipulated that 100 shares of the stock cost petitioner $21,650 and by the stipulation the respondent concedes the cost of the 50 additional shares to the extent of $7,500, the petitioner reserving the right to introduce evidence to show that the cost of the latter stock was in excess of $7,500.  Evidence introduced by petitioner at the hearing, in our opinion, shows, and we so find, that the 50 shares cost petitioner $15,000, making the entire cost of the 150 aforesaid shares $36,650.  In March and April 1933, after the bank holiday, the assets of the Hamilton Trust Co. were insufficient by approximately $500,000 to pay depositors.  The depositors released to the bank 30 percent of their deposits, or $1,725,000, but instead thereof received preferred stock redeemable at $1,725,000, leaving the common stock in the same relative position as before.  The record shows comparatively few transfers of the common stock after June 21, 1933, and those were at prices from 2 1/2 cents to 10 cents per share.  Under such conditions it is evident that the common stock of the Hamilton Trust Co. became worthless*1047  in 1933.  We so hold.  We therefore hold that the petitioner is entitled to the claimed deduction of $36,650, the cost of his aforesaid 150 shares of common stock of the Hamilton Trust Co., as well as for the stipulated loss deduction of $1,512, sustained the same year, on his common stock of the Harriman National Bank & Trust Co. of New York City.  Decision will be entered under Rule 50.