Legal Research AI

Gordon v. Commissioner

Court: United States Board of Tax Appeals
Date filed: 1925-05-23
Citations: 1925 BTA LEXIS 2620, 1 B.T.A. 1223
Copy Citations
1 Citing Case
Combined Opinion
Appeal of CHARLES A. GORDON.
Gordon v. Commissioner
Docket No. 1728.
United States Board of Tax Appeals
1 B.T.A. 1223; 1925 BTA LEXIS 2620;
May 23, 1925, decided Submitted April 6, 1925.
*2620 Albert I. Coe, C.P.A., for the taxpayer.
Robert A. Littleton, Esq., for the Commissioner.

*1223 Before IVINS, MARQUETTE, and MORRIS.

This appeal is from a deficiency in income tax for the year 1919 in the sum of $4,015.21. The deficiency arose from the refusal of the Commissioner to allow the taxpayer a deduction for an alleged loss sustained on an exchange of stock in a corporate reorganization. The case was submitted on the pleadings, from which the Board makes the following

*1224 FINDINGS OF FACT

1. The taxpayer is a citizen of the United States, residing in New York City. At various times during the years 1911-1915, inclusive, he purchased and owned 385 shares of stock in Perry Dame & Co., for which he paid the par value of $100 a share, or a total of $38,500. During this time the corporation was capitalized at $625,000.

2. In December, 1919, the said corporation reorganized to secure new capital. The capital stock of the reorganized company was $975,000, made up to $350,000 preferred stock (3,500 shares, $100 par value each) and $625,000 common stock (12,500 shares, $50 par value each). The stockholders of the old company received*2621 25 per cent of the new common stock and the remaining 75 per cent of the new common stock was distributed as a bonus to the purchasers of the preferred stock.

3. The taxpayer for his 385 shares of the old company received 171 shares of common stock of the reorganized company of a par value of $50, or $8,550. The taxpayer claims that the actual value of his stock was $45 per share, so that in the exchange he received a value of but $7,695, thereby sustaining a loss of $30,805. The Commissioner refused to allow such loss under the provisions of section 202(b) of the Revenue Act of 1918, and in a deficiency letter mailed November 29, 1924, assessed a deficiency against the taxpayer in the sum of $4,015.21.

DECISION.

The determination of the Commissioner is approved.