Todd v. Commissioner , 3 B.T.A. 327 ( 1926 )

APPEALS OF GEORGE W. TODD AND LIBANUS M. TODD.

Todd v. Commissioner

Docket Nos. 2959 and 2960.

United States Board of Tax Appeals

3 B.T.A. 327; 1926 BTA LEXIS 2702;

January 14, 1926, Decided Submitted October 1, 1925.

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Deductible losses and taxable gain determined.

Thomas J. Hargrave, Esq., for the taxpayers.

L. C. Mitchell, Esq., for the Commissioner.

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GRAUPNER

Before GRAUPNER and PHILLIPS.

These appeals are from determinations of deficiencies in income tax for the calendar years 1919, 1920, and 1921, as follows:

George W. Todd	$3,002.64
Libanus M. Todd	4,793.05

In each case only about $700 of the deficiency asserted is in controversy. The facts in both cases are identical.

FINDINGS OF FACT

1. On August 15, 1907, each of the taxpayers purchased 25 shares of common stock of the Baltimore & Ohio Railroad for $2,281.25. These shares had a fair market value on March 1, 1913, of $2,518.75. They were sold in 1919 for $1,714.67.

2. On December 13, 1912, each of the taxpayers bought 50 shares of preferred stock of the Great Northern Railroad for $6,750, and on December 23, 1912, purchased 25 shares of the same stock for $3,375. On March 1, 1913, the block of 50 shares had a fair market value of $6,325, and the 25 shares a value of $3,162.50, or a total value of $9,487.50. All of the stock was sold in 1919 for $7,257.

3. On July 6, 1910, the taxpayers each purchased 50 shares of Union Pacific Railroad common stock for $7,806.25. This stock had a fair market value on March 1, 1913, of $7,625, and was sold in 1919 for $6,685.

4. In 1912 each of the taxpayers purchased 5 shares of stock of the Genessee Investment Co., for $500. This corporation was dissolved in December, 1920. At the time of its dissolution it had no assets and has never paid a liquidating dividend to its stockholders. The stock became worthless in 1920.

5. In 1920 the taxpayers each acquired stock of the Arizona Cave Creek Mines Corporation at a cost of $250. This corporation was organized under the laws of Arizona and was engaged in the mining business. It ceased operations early in 1920 and at that time had no assets. It has never paid a liquidating dividend and still owes franchise taxes. The stock became worthless in 1920.

6. In October, 1919, each of the taxpayers acquired stock in the Texas and Pacific Oil Syndicate at a cost of $250. This syndicate was formed for the purpose of financing the drilling of oil wells. The wells proved to be dry and in 1921 it was learned by the taxpayers that the syndicate had been dissolved. The stock became worthless in 1921.

7. In June, 1918, the taxpayers purchased stock in the Rochester Sterling Groceries, Inc., at a cost to each of $1,000. At a meeting of the stockholders held on April 15, 1921, a majority voted for the dissolution of the corporation, which thereupon ceased operations. The company paid a part of its liabilities but has never liquidated its stock.

8. In October, 1920, the taxpayers purchased bonds of the Grand Trunk Railroad at a net cost to each of $4,975. The bonds were sold in 1921 for $5,085.

9. In 1920 each of the taxpayers purchased stock in the Lance Creek Royalties at a cost of $63.75. In 1921, there was practically no market for this stock.

10. In March, 1920, the taxpayers each acquired bonds of the City of Berlin, Germany, payable in marks, at a cost of $162.50. In 1921 German marks had almost ceased to be of value and the amount which could have been realized from a sale would have amounted to no more than the commission. Consequently, each of the taxpayers wrote the amount off as a loss.

DECISION.

The deficiencies should be computed in accordance with the following opinion. Final determination will be entered on 10 days' notice, in accordance with Rule 50.

OPINION.

GRAUPNER: The conclusions which we draw from the evidence in this appeal are that each taxpayer has sustained deductible losses and realized a taxable gain as set out in the following table:

Year	Security	Loss sustained	Gain realized
1919	Baltimore and Ohio stock	$566.58
1919	Great Northern stock	2,230.50
1919	Union Pacific stock	940.00
1920	Genessee Investment stock	500.00
1920	Arizona Cave Creek Mines (corporation stock)	250.00
1921	Texas and Pacific Oil (syndicate stock)	250.00
1921	Grand Trunk Railroad bonds		$110.00

With respect to the stock of the Rochester Sterling Groceries, Inc., there is no evidence to show whether or not the company had assets remaining at the time of its dissolution. The same situation exists with respect to the stock of the Lance Creek Royalties Co. Consequently, we can not hold that the stock was without value, as the taxpayers contend. There is no evidence as to the date of maturity of the bonds of the City of Berlin or that such bonds were subject to call or were called in 1921. Therefore, we can not hold that the taxpayers were entitled to deduct the cost thereof during that year.