Parkford v. Commissioner , 45 B.T.A. 461 ( 1941 )

FRANCES M. PARKFORD, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

E. A. PARKFORD, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Parkford v. Commissioner

Docket Nos. 96459, 102987.

United States Board of Tax Appeals

45 B.T.A. 461; 1941 BTA LEXIS 1121;

October 24, 1941, Promulgated

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1. A taxpayer, on the accrual basis, rendered services under two contingent contracts. Under one he became entitled to receive stock when the stock out of which he was to be paid became available to the one for whom the services were rendered. Under the evidence it is held the right to receive this fee accrued on January 15, 1936, when the court approved the settlement making the stock available.

2. After approval of the agreement by the court but before the stock was delivered to the taxpayer, he was adjudicated a bankrupt. The stock, pursuant to order of the bankruptcy court, was delivered to and sold by the trustee-receiver of the bankrupt estate, the proceeds being used to pay the bankrupt's creditors. Held, that the fair market value of the stock should be included in taxpayer's gross income.

3. Under the other contract the taxpayer became entitled to receive a cash fee for services which had been rendered partially before, and partially after, the filing of a petition in bankruptcy. The trustee-receiver made claim to the entire fee, which had been deposited in escrow. After hearing in the bankruptcy court, a compromise was agreed upon and approved by the court, under which one-half of the fee was paid to the trustee-receiver in bankruptcy, the remainder being paid to the taxpayer. Held, that the entire fee should be included in taxpayer's gross income.

4. The taxpayer did not sustain any deductible loss by reason of his adjudication in bankruptcy following the filing of an involuntary petition by his creditors.

John C. Altman, Esq., and Louis E. Goodman, Esq., for the petitioners.

Samuel Taylor, Esq., for the respondent.

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MELLOTT

These proceedings, duly consolidated for hearing, involve deficiencies in income tax for the calendar year 1936 as follows:

Petitioner	Docket No.	Amount
Frances M. Parkford	96459	$38,723.61
E. A. Parkford	102987	38,723.61

Petitioners concede that some of the adjustments made by the respondent to the net income disclosed by their joint return for the taxable year were proper. The present controversy arises from respondent's inclusion of $82,500 in income as salaries and commissions. This is composed of $75,000 (now conceded by respondent to be erroneous in so far as it exceeds $48,000), being the fair market value of $6,000 shares of Universal Consolidated Oil Co. stock received under the circumstances hereinafter shown in our findings, and $7,500, received by a trustee-receiver in bankruptcy for the estate of E. A. Parkford. Giving effect to the concessions of the respective parties our questions are: (1) Should either, both, or neither of the sums of $48,000 and $7,500 be included in petitioners' income? (2) Did petitioners sustain a deductible loss through the adjudication of E. A. Parkford as a bankrupt and through the seizure and permanent retention of his property?

FINDINGS OF FACT.

Petitioners, husband and wife, have resided at Los Angeles, California, since their marriage in 1923. For the calendar years 1935 and 1936 their books were kept on the accrual basis. Separate income tax returns on such basis were filed with the collector of internal revenue at Los Angeles for the year 1935 and a joint return upon the same basis was filed for the year 1936. The tax shown to be due upon the last mentioned return, amounting to $1,676.54, was duly paid. Petitioners reported their income as community income, each including one-half of the total received. Since all questions herein arise primarily from the activities of E. A. Parkford, he, for convenience, will frequently be referred to as the petitioner.

Petitioner for approximately 24 years has been engaged in the oil production business making, or assisting in the making of, mergers for the sale of oil properties and in acting as a "negotiator" or adjuster of controversies. In the fall of 1935 he was employed by E. G. Starr, president of the Universal Consolidated Oil Co. (hereinafter called Universal) to attempt to secure settlement of a controversy between the minority stockholders of Universal and the receiver of the Richfield Oil Co. (hereinafter called Richfield). Richfield was then in a Federal equity receivership. Petitioner's employment was contingent. It was agreed that if he should be successful in bringing about a compromise of the controversy upon terms agreeable to Starr and his associates, he should receive 9,000 shares of Universal stock. The general purpose of the employment was to secure for Universal 186,778 shares of its stock, held by a bank as trustee for the bondholders of Richfield, and to secure 1,000 shares of its stock held by the receiver of Richfield.

Petitioner employed R. E. Bering to assist him in negotiating a settlement of the controversy and agreed that in the event their joint work should be successful, Bering would receive one-third of the total remunerations, or 3,000 shares of the Universal stock.

Petitioner and Bering succeeded in obtaining an agreement settling the controversy. On November 19, 1935, a written agreement, setting forth the terms of the settlement, was entered into between the receiver and Starr. It provided for the conveyance of some assets by Universal, the payment by it of some money, and the release of certain claims against the receiver, in return for which Universal was to have the stock (186,778 shares) referred to above.

The agreement provided that the receiver should "endeavor diligently to secure the approval by the United States District Court in and for the Southern District of California" to the execution of the contract and carrying out its various provisions. It provided that there should be a period of 30 days from and after the date of the agreement in which the parties should diligently endeavor to secure the approvals, consents, and performances required and, in the event such necessary consents and approvals should not be obtained by the expiration of 30 days, then the agreement, without any notice or action, was to become fully terminated and cease to be of any force or effect. By mutual agreement of the parties, however, the time for the fulfillment of the conditions of the contract could be extended beyond the 30-day period.

On or about November 26, 1935, the receiver filed his verified petition in the United States District Court, praying for an order authorizing the settlement of the controversy as tentatively agreed upon. Hearing on the petition was set for 2:15 p.m. on the 9th day of December 1935 and duly continued to December 23, 1935. In said petition the receiver prayed, among other things, that the bank be required to show cause why it should not do certain acts and make the deliveries and transfers referred to therein and why it should not be ordered to acquiesce and cooperate with him in all acts required or appropriate for the consummation of the agreement between him and Starr. On December 23, 1935, the bank filed in the same proceeding its petition, as trustee, praying for an adjudication and determination of its duty in respect to the proposed compromise. It alleged that the proposed compromise should be modified, changed, and amended as set forth in its petition and that such changes would be "to the benefit and best interests of the holders of bonds secured by the trust indenture."

On December 23, 1935, the court entered an order assuming jurisdiction under the bank's petition, setting it for hearing on the 15th day of January, 1936, at 10 a.m. On said date the court confirmed and approved the agreement between Starr and the receiver, subject, however, to several modifications as shown in the order, authorized the receiver to transfer and deliver to Universal the 1,000 shares of Universal stock and authorized the bank to transfer and deliver to Universal the 186,778 shares of the capital stock of Universal standing in its name as trustee. This order was subsequently modified by the court on January 21, 1936, in certain particulars not material to the present controversy.

A meeting of the stockholders of Universal was held on December 23, 1935. The meeting had been called for two purposes; first, to determine whether the contract which had been entered into between the receiver and Starr should be approved and, second, to determine what compensation, if any, should be paid for the services rendered in bringing about the execution of the contract. A temporary recess was declared, during which the minority stockholders held a separate meeting. Some of the legal phases of the proposed contract were explained to the minority stockholders and a brief resume of the litigation which had preceded the making of the compromise was given. Starr's attorney read a resolution which he had prepared for adoption. Both questions were then discussed. Resolution was adopted "that out of the 186,778 shares of Universal stock now standing in the name of Security First National Bank of Los Angeles as trustee and the 1,000 shares of Universal stock now standing in the name of * * * [the receiver] there shall be assigned, transferred and delivered to E. A. Parkford in full settlement for his services rendered to the minority stockholders and to this corporation at the request of E. G. Starr 9,000 shares of such stock." Eight thousand shares out of the 187,778 were also authorized to be transferred to the attorney for the minority stockholders and 12,675 to Starr for his services. The remainder, or 158,103 shares, were to be assigned, transferred, and delivered to the corporation and canceled.

The stockholders of Universal reconvened on the same day and the action taken by the minority stockholders was explained. The minutes show that the attorney for the bank stated "that the trustee did not wish to assume the responsibility of acting without consideration by the court and that a petition had theretofore been filed * * * [with the court] asking for instructions * * * in approving or disapproving the proposed compromise." He also stated "that the matter of compensation was a matter in which the trustee he represented was not directly concerned. He pointed out that it was a transaction which would be consummated, if at all, after the signing of the compromise agreement. He said that, the matter of compensation being one subsequent to the execution of the agreement, when the trustee would no longer be a stockholder, he would like to refrain from voting on the proposition. President Montgomery then called for a vote on the resolution [approving the settlement and paying out the fees referred to above] which was unanimously adopted * * *."

On January 28, 1936, at a regular meeting of the board of directors of Universal, a resolution was adopted, reciting, in brief, the execution of the contract of November 19, 1935, the action of the stockholders of December 23, 1935, and the approval of the contract by the court "in two separate orders of the said court respectively dated January 15, 1936 and January 21, 1936, said approval of the said agreement being subject to certain modifications set forth in the said orders." The resolution concluded with a ratification, approval, confirmation, and acceptance of the contract and authorized, empowered, and directed Universal's officers to execute and deliver all contracts, releases, assignments, and other instruments necessary to put it into full effect.

On January 24, 1936, an involuntary petition in bankruptcy was filed against E. A. Parkford in the United States District Court for the Southern District of California. On February 14, 1936, Parkford was adjudicated a bankrupt. On January 24, 1936, a receiver of his estate in bankruptcy was appointed and on March 23, 1936, the same individual was appointed trustee in bankruptcy. The trustee-receiver was authorized by the bankruptcy court to conduct Parkford's business.

The trustee-receiver made claim to the 6,000 shares of Universal stock which Parkford was to receive as his compensation - 9,000 shares less the 3,000 turned over to Bering - and the bankruptcy court made an order requiring Universal to deliver said 6,000 shares directly to the trustee-receiver. Delivery was made pursuant to the order. None of the shares or the proceeds derived from the sale of them was at any time received by Parkford personally.

The fair market value of the 6,000 shares of Universal stock on January 15, 1936, was $48,000. They were turned over to the trustee-receiver receiver on the 20th of March, 1936, and were subsequently sold by him for $78,000.

Petitioners did not include, either in their separate income tax returns for the calendar year 1935 or in their joint return for 1936, any amount for, or in connection with, the 6,000 shares of Universal stock.

In 1935 Parkford was employed to negotiate settlement of a controversy between the Associated Oil Co. (hereinafter referred to as Associated) and an individual by the name of Guiberson. It was agreed that Parkford was to receive 10 percent of the amount for which the controversy should be settled.

Pursuant to his employment Parkford worked out a settlement of the controversy and in connection therewith rendered services of a nature similar to those rendered by him in connection with the Universal transaction. The services were begun during the month of September 1935 and continued until about February 7, 1936. Part of them were rendered before, and part of them were rendered after, the filing of the petition in bankruptcy. The controversy was settled for the sum of $150,000, Parkford thereby becoming entitled to receive the sum of $15,000.

The trustee-receiver made claim to the $15,000 commission and served a demand for its possession. The amount had been deposited in escrow. After hearing in the bankruptcy court, a compromise was agreed upon by Parkford and the trustee-receiver and approved by the bankruptcy court. Under the compromise petitioner received $7,500 of the fund held in escrow and the remaining $7,500 was paid directly to the trustee-receiver.

Seven thousand five hundred dollars of the Associated fee was included in the joint return filed by the petitioners during the year 1937 for the calendar year 1936. The tax shown to be due by said return, namely $1,676.54, was duly paid to the collector. The amount paid to the trustee-receiver in bankruptcy was never included in any return filed by petitioners. The trustee-receiver filed a return for the bankrupt estate for the calendar year 1936, in which he treated the $7,500 and the $78,000 received from the sale of the Universal stock as capital gain. The return filed by him disclosed a net loss of more than $22,000 and no tax was reported or paid.

On December 22, 1937, the collector of internal revenue for the sixth district of California filed in the bankruptcy proceeding a claim for income taxes for the year 1936 in the amount of $38,723.61. Notice and demand for payment was issued September 15, 1938. The trustee, on September 25, 1939, filed objections to the allowance of the claim, alleging that the taxes were "claims against E. A. Parkford individually, and not against the estate of E. A. Parkford, a Bankrupt, or its Trustee." On November 2, 1939, Parkford also filed objections, alleging that neither he nor his wife, during the calendar year 1936, had any gross income in addition to that reported in their joint income tax return for that year. On February 9, 1940, the referee held that "the bankrupt individually has no standing in this court to object to said claim and the finding that the collector has no provable claim against the estate is in no way an adjudication as to any claims the collector may have against the bankrupt individually for the calendar year 1936." He overruled the objections of the bankrupt individually to the claim and sustained the objections of the trustee, stating in his order that "the said claim of said Collector of Internal Revenue as filed for $43,125.61 [apparently $38,723.61 plus interest] against the above estate is hereby disallowed in its entirety, without prejudice to any claims the Collector may have against the bankrupt individually for the calendar year 1936."

The assets of the bankrupt, taken over by the trustee-receiver in bankruptcy, had a cost basis to Parkford of $609,000. The total amount of approved claims filed in the bankruptcy proceeding was $918,000, later being reduced to $793,288.20. Dividends aggregating 5 1/2 percent, or $49,867.09, were paid to the creditors in the bankruptcy proceeding. The total value of the assets remaining in the hands of the trustee-receiver at the end of the year 1936 was approximately $10,000. Some of them were disposed of during 1937, the trustee-receiver realizing between $6,000 and $7,000 therefrom. At the date of the hearing, after the payment of the dividends and expenses of administration in connection with the bankruptcy estate, there still remained in the hands of the trustee-receiver cash in the amount of $3,253.17 and miscellaneous assets having an estimated value of between $2,000 and $2,500.

OPINION.

MELLOTT: Petitioners contend that the fair market value of the Universal shares, if income at all, became income when the right to receive them accrued to Parkford, which, they say, occurred in 1935 rather than 1936. They point out that all of the services had been rendered prior to the stockholders' meeting on December 23, 1935; argue that the corporation had "bound itself by the resolution, unconditionally, to deliver" the shares to Parkford; contend that his right to receive them then became absolute; and insist that the statement in the resolution to the effect that delivery to him was to be made "out of the 186,778 * * * and the 1,000 shares" was merely descriptive - a designation "of the place from which the shares were to come." We do not agree. While Parkford's services had been largely rendered in bringing about the agreement of November 19, 1935, it is clear that he was to receive nothing unless the corporation succeeded in acquiring the stock. Even then he was more or less dependent upon the munificence of the corporation; for his contract was only with Starr. When it became probable that the corporation would secure the possession of the stock the Universal stockholders then authorized 9,000 shares to be turned over to Parkford, 8,000 to the attorney and 12,675 to Starr. The minutes of the corporation show that Starr had "explained that both contracts [with Parkford and the attorney] were entirely contingent and that the parties were to receive nothing in the event that they were unsuccessful and were to receive the number of shares specified only in the event that their efforts were successful." In our judgment the corporation had not "bound itself, unconditionally, to deliver the shares of Parkford" merely by adopting a resolution agreeing to deliver to him 9,000 shares "out of" the 186,778. It knew that it would have no shares to deliver unless and until the court should approve the proposed settlement. The agreement contemplated and required that the receiver "endeavor diligently to secure the approval by" the court "and by such other persons, firms or corporations as the Court should deem necessary." The approval of the trustee was absolutely necessary; and it would agree only provided a modification of the proposals should be made and only then if the court should direct it to do so. The order of the court, therefore, was a necessary concomitant to securing the stock out of which petitioner, Starr and the attorneys were to be paid. The order was not entered until January 15, 1936. Then, and not until then, did petitioners' right to receive the stock "become fixed and unconditional." H. Liebes & Co. v. Commissioner (C.C.A., 9th Cir), 90 Fed.(2d) 932; Continental Tie & Lumber Co. v. United States,286 U.S. 290">286 U.S. 290; North American Oil Consolidated v. Burnet,286 U.S. 417">286 U.S. 417. See also Frost Lumber Industries, Inc.,44 B.T.A. 1249">44 B.T.A. 1249, and cases therein cited. The fair market value of the stock, in our opinion, then constituted income to petitioners and should have been accrued upon their books. That is apparently the view which they took; for they did not accrue it in 1935. While this is not controlling, United States v. Anderson,269 U.S. 422">269 U.S. 422; Commissioner v. Union Pacific R. Co., 86 Fed.(2d) 637, it is at least an indication that they felt an "unconditional right to receive it" had not arisen in that year.

Petitioners place considerable reliance upon the testimony of the attorney for the minority stockholders, the gist of which was that a partial hearing was had before the court on December 23, 1935, at which time it was indicated approval of the plan would be granted, after which the stockholders repaired to the office of the company and held the series of meetings shown in our findings. Petitioners' contention seems to be that since the court indicated its willingness to approve the proposed plan - subject only to hearing upon the petition of the trusteebank for instructions - the corporation was then willing to bind itself, unconditionally, to deliver the 9,000 shares to Parkford and Bering. We are of the opinion, however, that the testimony of this witness does not justify us in reaching such conclusion. The court records do not indicate that the court approved the proposed agreement on that date. They are the best evidence. Moreover, the minutes of the stockholders' meetings show that the corporation never intended to give the stock to Starr, Parkford, or the attorney unless it was received. Since the order of the court was not entered until January 15, 1936, and since petitioners' right to receive the stock did not become absolute until then, we are of the opinion, as stated above, that the fair market value of the stock on that date then accrued to them as income.

The facts with reference to the $7,500 are not seriously in dispute. Parkford had been employed to render services which would ultimately entitle him to receive $15,000. Some of them were rendered before and some were rendered after the filing of the petition in bankruptcy. A compromise of the dispute between him and the trustee resulted in $7,500 being paid to each of them. The parties agree that it is impossible to allocate any particular portion of the fee to the services rendered before and to the services rendered after the adjudication. They also agree that the approval of the bankruptcy court to the compromise was valid. Respondent included the whole amount in petitioners' income upon the theory that the right to receive it accrued within the calendar year. Petitioners contend that "the right to receive the full sum of $15,000 never at any time accrued to Parkford, and since the amount of compensation payable to him was by order of court limited to $7,500, it follows that only $7,500 accrued to him and the action of respondent in treating the additional $7,500 as taxable income to Parkford cannot be justified upon any theory."

Petitioners argue that the right to receive the sum of $15,000 did not accrue to Parkford prior to the bankruptcy. We agree. North American Oil Consolidated v. Burnet, supra.But that is not determinative of the present controversy. The right to receive it did accrue during the year 1936. It resulted from services rendered by him. The services were completed and the money became available (except for the intervention of the trustee) on February 7, 1936. Does the fact that a petition in bankruptcy was then on file, that the receiver was claiming the fee, and that Parkford was shortly thereafter adjudicated a bankrupt prevent the fee from accruing to him? We think not.

Under the Bankruptcy Act (sec. 70 as amended; 11 U.S.C.A., sec. 110) the trustee of the estate of a bankrupt is "vested by operation of law with the title of the bankrupt as of the date of the filing of the petition in bankruptcy * * *" to all property of the bankrupt (except exempt property), "including rights of action, which prior to the filing of the petition he could by any means have transferred or which might have been levied upon and sold under judicial process against him, or otherwise seized, impounded, or sequestered * * *." As to all property in the possession or under the control of the bankrupt at the date of bankruptcy or otherwise coming into the possession of the bankruptcy court, the trustee "shall be deemed vested as of the date of bankruptcy with all the rights, remedies and powers of a creditor then holding a lien thereon by legal or equitable proceedings * * *; and as to all other property, the trustee shall be deemed vested as of the date of bankruptcy with all the rights, remedies and powers of a judgment creditor then holding an execution duly returned unsatisfied * * *."

It has frequently been stated that a trustee in bankruptcy "stands in the shoes of the bankrupt" for most purposes. Cf. Schultz v. England, 106 Fed.(2d) 764. If the bankrupt could not have transferred the property at the time of the filing of the petition, or if it was not subject to seizure under judicial process at that time, then no title vested in the trustee. In re Baxter, 104 Fed.(2d) 318. Perhaps there is some substance to, or reason for, the "doubt" expressed by the respondent as to whether the trustee was entitled to any part of the $15,000; but that need give us no concern. If the trustee was entitled to the fee under the above section of the bankruptcy act, it was probably because it was "property" of the bankrupt. This would undoubtedly be true if he had done all that he was required to do prior to the bankruptcy in order to be entitled to the compensation. In re Leibowitt, 93 Fed.(2d) 333; certiorari denied, Stein v. Leibowitt,303 U.S. 652">303 U.S. 652. If, on the other hand, petitioner's right to receive the fee accrued to him after the bankruptcy and he voluntarily released a portion of it to the trustee, it is obvious that all of it must be included in his gross income.

Much that has been said with reference to the $15,000 fee is apposite to the $48,000 fee represented by the Universal stock. The last event entitling petitioners to receive this fee - approval of the contract by the court - occurred on January 15, 1936, nine days prior to the adjudication in bankruptcy. In re Leibowitt, supra; Lucas v. North Texas Lumber Co.,281 U.S. 11">281 U.S. 11; Edwards Drilling Co.,35 B.T.A. 341">35 B.T.A. 341, and cases cited; affd., 95 Fed(2d) 719. A "practical construction" of the taxing act would probably justify the inclusion in gross income of the assigned income, under the rationale of Lucas v. Earl,281 U.S. 111">281 U.S. 111; Burnet v. Leininger,285 U.S. 136">285 U.S. 136; Helvering v. Horst,311 U.S. 112">311 U.S. 112; Helvering v. Eubank,311 U.S. 122">311 U.S. 122; and Harrison v. Schaffner,312 U.S. 579">312 U.S. 579, even though it was an involuntary assignment. It is unnecessary to place our decision on this ground, however. The income should have been accrued upon petitioners' books when all of the events occurred entitling them to receive it. It is idle to contend it is inequitable to tax them upon it because they did not personally receive it. All of it was used to pay their debts, and, if equities were to be weighed, it would be far more inequitable to the fiscus to permit the income to escape taxation altogether. That would be the result if it is not included in petitioners' gross income.

Upon brief petitioners argue that a recent unpublished memorandum opinion of the Board, in which it was held that a lawyer who in an earlier year had assigned to one of his creditors his right to receive certain fees was not in receipt of income when the fee was paid to the assignee, supports their contention that they can not be taxed upon the income unless it is personally collected by them. The cited case does not hold, as petitioners upon brief state, "that an insolvent taxpayer is not chargeable with income where he does not have the use or enjoyument thereof but instead the income is paid directly to his creditors." It was pointed out in the cited case that the effect of the loan in the earlier year was not before us. Our conclusion in the instant proceeding is not in conflict with the holding in the cited case. In addition it may be pointed out that, even if the holding in the cited case had been as set out in petitioners' brief, that could not aid them; for they in effect had "the use" of the income when their debts were paid with it. We are of the opinion and hold that both the $48,000 and the $7,500 must be included in petitioners' gross income for the year 1936.

Petitioners' final contention is that by reason of the seizure and permanent retention of all of Parkford's assets by the trustee in bankruptcy they sustained a deductible loss for the year 1936 in a sum far in excess of the entire net income determined by the respondent. They point out that the total cost of the property turned over to the trustee was approximately $609,000 and approved claims $793,000 and say: "* * * there obviously was no possible surplus remaining to go to the bankrupt and the difference between the total cash cost * * * and the total amount realized in the bankruptcy proceeding, far exceeded the net income for 1936 of Parkford * * * of $113,713.14. Such excess amounted to several hundred thousand dollars. It follows therefore that taxpayer had a loss, as a result of the seizure and retention of his assets * * * in an amount far in excess of the net income claimed to have been received by him, by respondent in his deficiency notice. That this is a proper deductible loss was held in Stuart v. Commissioner,38 B.T.A. 1147">38 B.T.A. 1147."

The contention is fallacious. A casual reading of the cited case might indicate that such a holding was made; but the holding was: "* * * petitioner sustained a loss in 1934 as the result of acting as a director of the Guaranty Building & Loan Association. The loss sustained, in the amount of at least $12,621.06, is a legal deduction from gross income." The taxpayer had been sued and judgment had been rendered against him for more than $7,000,000. He filed a voluntary petition in bankruptcy and turned over all of his property to the trustee. It was pointed out that the judgment had been rendered against him "by reason of his having been a director and vice president of" the building association; that "This was a business undertaking * * * and the loss was one sustained in trade or business." Opinion was expressed "that the bankruptcy proceeding has nothing to do with the deductibility of the loss."

The Stuart decision, supra, is the only authority cited by petitioners in support of their contention. No statute or court decision under which any such alleged loss could be allowed is called to our attention and we know of none. The allowance of deductions "'depends upon legislative grace; and only as there is clear provision therefor can any particular deduction be allowed.' New Colonial Ice Co. v. Helvering,292 U.S. 435">292 U.S. 435, 440." Deputy v. DuPont,308 U.S. 488">308 U.S. 488. Moreover it is difficult, if not impossible, to see how Parkford could have suffered a "loss" when, through the bankruptcy proceedings, he was discharged from liabilities greatly in excess of the actual cost - and basis - of the property which he turned over. Petitioners have not proved that they sustained any deductible loss.

Some evidence was introduced by petitioners in support of their charge that the respondent erred in denying a loss of $21,000 on 95 shares of the capital stock of the Kern County Realty Co. The contention was ultimately abandoned. We have accordingly refrained from making any findings of fact on this issue.

The deficiencies shall be recomputed, including in petitioners' income $55,500 instead of $82,500 as salaries and commissions, and

Decision will be entered under Rule 50.