*3218 1. Purported sale of stock by petitioner's husband, in which she held a one-half interest as community property, for the purpose of establishing a loss for income-tax purposes, held not to have been a bona fide sale.
2. Evidence held insufficient to justify the conclusion that petitioner's return in which the loss was taken as a deduction, was wilfully false and fraudulent.
*616 The Commissioner determined a deficiency in income tax for 1921, in the amount of $59,823.40.
*617 It is claimed that the Commissioner erred in disallowing the petitioner one-half of a loss sustained by herself and her husband, Niels Esperson, in October, 1921, on the sale of 8,100 shares of stock in the Invincible Oil Corporation, the total amount of the alleged loss which was $163,033.44, and this petitioner's one-half thereof being $81,516.72.
The Commissioner's ground for disallowing the claim for the loss was that the alleged sale of said stock was not a bona fide sale. There is no controversy in regard to the cost of said stock, or the price*3219 obtained, if in fact an actual sale was made.
FINDINGS OF FACT.
Petitioner is a resident of Houston, Tex., and in 1921 was the wife of Niels Esperson, and as such wife had a one-half community interest in the 8,100 shares of stock here involved. Niels Esperson died October 21, 1922, and this petitioner thereafter married one Stewart.
In 1921 petitioner and her husband, Niels Esperson, owned 8,100 shares of Invincible Oil Corporation stock which they had theretofore purchased, and which, since its purchase, had greatly declined in market value.
In October, 1921, Niels Esperson, being then in Chicago, called at the brokerage house of E. F. Leland & Co. He was well acquainted with H. B. Signor, a partner in that company, and at that time made and left with Signor, as a representative of that firm, an order to sell 8,100 shares of Invincible Oil Corporation stock; also an order to buy the same number of shares of said stock to be issued to Charles W. Brown and Gust H. Peters. Peters was Esperson's secretary and Brown was Esperson's brother-in-law. Neither Peters nor Brown at that time had an account with the Leland firm, nor did either of them have any financial standing*3220 with it. Petitioner conceded that such sale was made for the purpose of taking a loss on the income-tax returns of himself and wife. E. F. Leland & Co. carried out those orders through the New York Stock Exchange. The following is a report of the sale of said stock (immaterial items omitted) made by E. F. Leland & Co. to Niels Esperson:
E. F. LELAND & COMPANYNIELS ESPERSON,
DEAR SIR: We have this day SOLD for your account and risk according to the rules of the New York Stock Exchange
| Chicago | Credit delivery | Number | Description | Price | Sold |
| shares | through | ||||
| Oct. 20, 1921 | Oct. 21, 1921 | 300 | Invincible | 11 1/4 | Horton. |
| 300 | do | 10 7/8 | Ware & T. | ||
| 200 | do | 11 | Ware & T. | ||
| 500 | do | 10 7/8 | Orvis. | ||
| Oct. 19, 1921 | Oct. 20, 1921 | 300 | do | 11 1/4 | Horton. |
| 200 | do | 10 3/4 | Horton. | ||
| 200 | do | 11 | Horton. | ||
| Oct. 26, 1921 | Oct. 27, 1921 | 100 | do | 10 3/4 | Whitney. |
| Oct. 19, 1921 | Oct. 20, 1921 | 200 | do | 11 1/8 | Williston. |
| 700 | do | 11 | Williston. | ||
| 100 | do | 10 7/8 | Williston. | ||
| Oct. 19, 1921 | Oct. 20, 1921 | 700 | do | 11 1/4 | J. F. Clark. |
| 300 | do | 11 | J. F. Clark. | ||
| Oct. 18, 1921 | Oct. 19, 1921 | 300 | do | 11 1/8 | Whitney. |
| 200 | do | 11 3/8 | Whitney. | ||
| 100 | do | 11 5/8 | Bernstein. | ||
| 400 | do | 11 1/2 | Bernstein. | ||
| Oct. 18, 1921 | Oct. 19, 1921 | 900 | do | 11 | Clark Childs. |
| 100 | do | 11 1/8 | Clark Childs. | ||
| Oct. 17, 1921 | Oct. 18, 1921 | 100 | do | 11 | Whitney. |
| 200 | do | 10 7/8 | Whitney. | ||
| 200 | do | 11 1/2 | Whitney. | ||
| 500 | do | 11 1/2 | Whitney. | ||
| 500 | do | 11 1/2 | J. J. Danzig. | ||
| 100 | do | 11 1/2 | Williston. | ||
| 400 | do | 11 1/4 | Williston. |
*3221 *618 Respectfully yours,
E. F. LELAND & CO.E. F. Leland & Co. sent their check for the proceeds of that sale, less commissions and transfer tax, to Niels Esperson.
The following is the report of E. F. Leland & Co. to Gust H. Peters of the purchase of stock for him:
No. 6764.
E. F. LELAND & CO.,Chicago, 11/9/21.
GUS H. PETERS.
DEAR SIR: We herewith hand you by registered mail securities as listed below:
| No. | Amount | Description | Name |
| 7653/54 | 200 | Invincible Oil | Gus H. Peters. |
| 7540/42 | 300 | do | Do. |
| 7522/31 | 1000 | do | Do. |
| 7473/82 | 1000 | do | Do. |
| 7315/19 | 500 | do | Do. |
| 7881/90 | 1000 | do | Do. |
Yours truly,
E. F. LELAND & CO.The following statements were made by E. F. Leland & Co. to Brown and Peters:
E. F. LELAND & COMPANYCHAS. W. BROWN,DEAR SIR: We have this day BOUGHT for your account and risk according to the rules of the New York Stock Exchange:
| Chicago | Debit delivery | Number | Decription | Price | Bought |
| shares | through | ||||
| Oct. 19, 1921 | Oct. 20, 1921 | 700 | Invincible | 11 1/4 | J. F. Clark. |
| 300 | do | 11 | J. F. Clark. | ||
| Oct. 19, 1921 | Oct. 20, 1921 | 200 | do | 11 1/8 | Williston. |
| 700 | do | 11 | Williston. | ||
| 100 | do | 10 7/8 | Williston. | ||
| Oct. 26, 1921 | Oct. 27, 1921 | 100 | do | 10 3/4 | Whitney. |
| Oct. 20, 1921 | Oct. 21, 1921 | 300 | do | 11 1/4 | Horton. |
| 300 | do | 10 7/8 | Ware & Tranter. | ||
| 200 | do | 11 | Ware & Tranter. | ||
| 500 | do | 10 7/8 | Orvis Bros. | ||
| Oct. 19, 1921 | Oct. 20, 1921 | 200 | do | 11 | Horton. |
| 300 | do | 11 1/4 | Horton. | ||
| 200 | do | 10 3/4 | Horton. |
*3222 Respectfully yours,
E. F. LELAND & CO.*619 E. F. LELAND & COMPANY
GUS H. PETERS,
DEAR SIR: We have this day BOUGHT for your account and risk according to the rules of the New York Stock Exchange:
| Chicago | Debit delivery | Number | Decription | Price | Bought |
| shares | through | ||||
| Oct. 18, 1921 | Oct. 19, 1921 | 100 | Invincible | 11 1/8 | Clark Childs. |
| 900 | do | 11 | Clark Childs. | ||
| Oct. 18, 1921 | Oct. 19, 1921 | 300 | do | 11 1/8 | Whitney. |
| 200 | do | 11 3/8 | Whitney. | ||
| 100 | do | 11 5/8 | Bernstein. | ||
| 400 | do | 11 1/2 | Bernstein. | ||
| Oct. 17, 1921 | Oct. 18, 1921 | 100 | do | 11 | Whitney. |
| 200 | do | 10 7/8 | Whitney. | ||
| 200 | do | 11 1/2 | Whitney. | ||
| 500 | do | 11 1/2 | Whitney. | ||
| 500 | do | 11 1/2 | J. J. Danzig. | ||
| 100 | do | 11 1/2 | Williston. | ||
| 400 | do | 11 1/4 | Williston. |
Respectfully yours,
E. F. LELAND & CO.Niels Esperson approached Brown and Peters in October, 1921, and informed them of his intention to have purchased for them 8,100 shares of the Invincible Oil Corporation stock and that he would loan them the money to buy the same, and they assented. After the purchase by E. F. Leland & Co., that company sent*3223 to Brown and Peters, each, a bill for the purchase price of amount purchased by each, plus commissions, and in payment therefor Niels Esperson made his check payable to Brown and Peters, respectively, for the purchase price of each one's stock and they in turn indorsed such checks and sent same to E. F. Leland & Co.
The certificates of stock made to Brown and Peters, respectively, were sent by E. F. Leland & Co. to Brown and Peters, respectively, and the purchase price therefor was charged against them, each, on the books of Niels Esperson. The certificates were then endorsed by Brown and Peters, respectively, and delivered to Esperson as collateral. Esperson thereafter used them as collateral to secure advancements *620 made to him by E. F. Leland & Co. and they were so held by Lampson Brothers & Co., successors to E. F. Leland & Co., at the date of Esperson's death.
About July, 1923, the petitioner, as executrix, proposed to Brown and Peters to take back the Invincible Oil Corporation stock standing in their respective names and cancel the charge standing on the books against them. They each assented and this was done. Neither Brown nor Peters had paid any amount*3224 on such indebtedness.
The following was stipulated into the record of this case and shows the quotations of the Invincible Oil Corporation stock on the New York Stock Exchange on the dates therein indicated:
| Date | Sales | First | High | Low | Closing |
| Oct. 17, 1921 | 13,000 | 11 | 11 7/8 | 10 3/4 | 11 1/4 |
| Oct. 18, 1921 | 8,800 | 11 3/4 | 11 3/4 | 10 3/4 | 11 |
| Oct. 19, 1921 | 11,500 | 11 1/8 | 11 1/4 | 10 3/4 | 11 |
| Oct. 20, 1921 | 6,800 | 11 | 11 | 10 3/4 | 10 3/4 |
| Oct. 21, 1922 | 16 3/4 | 16 7/8 | 16 5/8 | 16 3/4 | |
| July 2, 1923 | 10 | 10 | 9 7/8 | 10 | |
| July 3, 1923 | 10 | 10 | 9 7/8 | 9 7/8 | |
| July 4, 1923 | Holiday | ||||
| July 5, 1923 | 10 | 10 | 9 3/4 | 9 7/8 | |
| July 6, 1923 | 9 7/8 | 10 3/8 | 9 7/8 | 10 | |
| July 7, 1923 | 9 7/8 | 9 7/8 | 9 7/8 | 9 7/8 | |
| July 8, 1923 | Sunday | ||||
| July 9, 1923 | 10 1/4 | 10 1/4 | 10 | 10 | |
| July 10, 1923 | 10 | 10 | 10 | 10 | |
| July 11, 1923 | 10 1/8 | 10 1/8 | 10 | 10 | |
| July 12, 1923 | No transactions | ||||
| July 13, 1923 | 10 1/8 | 10 1/8 | 10 1/8 | 10 1/8 | |
| July 14, 1923 | 10 1/4 | 10 3/8 | 10 1/4 | 10 3/8 | |
| July 15, 1923 | Sunday | ||||
| July 16, 1923 | 10 1/8 | 10 1/8 | 10 | 10 | |
| July 17, 1923 | No quotations | ||||
| July 18, 1923 | 10 | 10 | 10 | 10 | |
| July 19, 1923 | 10 1/8 | 10 3/4 | 10 1/8 | 10 1/2 | |
| July 20, 1923 | 10 1/2 | 10 5/8 | 10 1/2 | 10 1/2 | |
| July 21, 1923 | 10 1/2 | 10 1/2 | 10 1/4 | 10 1/4 | |
| July 22, 1923 | Sunday | ||||
| July 23, 1923 | No sales | ||||
| July 24, 1923 | 10 1/4 | 10 1/4 | 10 1/8 | 10 1/8 | |
| July 25, 1923 | 10 1/8 | 10 1/8 | 10 1/8 | 10 1/8 | |
| July 26, 1923 | 10 1/8 | 10 3/8 | 10 1/8 | 10 1/8 | |
| July 27, 1923 | 10 | 10 | 10 | 10 | |
| July 28, 1923 | 9 7/8 | 10 | 9 3/4 | 9 3/4 | |
| July 29, 1923 | Sunday | ||||
| July 30, 1923 | 9 5/8 | 9 5/8 | 9 1/2 | 9 1/2 | |
| July 31, 1923 | 9 1/2 | 9 1/2 | 9 | 9 | |
| Dec. 10, 1923 | 11 1/4 | 11 1/4 | 10 3/4 | 11 | |
| Dec. 11, 1923 | 11 | 11 | 10 3/4 | 10 7/8 | |
| Dec. 12, 1923 | 10 7/8 | 10 7/8 | 10 3/4 | 10 7/8 | |
| Dec. 13, 1923 | 10 3/4 | 11 | 10 3/4 | 11 | |
| Dec. 14, 1923 | 11 | 11 3/8 | 10 7/8 | 10 7/8 | |
| Dec. 15, 1923 | 11 3/8 | 12 1/2 | 11 1/4 | 12 3/8 | |
| Dec. 16, 1923 | Sunday | ||||
| Dec. 17, 1923 | 13 | 14 1/2 | 13 | 14 1/8 | |
| Dec. 18, 1923 | 14 1/8 | 14 1/2 | 13 5/8 | 14 | |
| Dec. 19, 1923 | 14 | 14 3/8 | 13 7/8 | 14 | |
| Dec. 20, 1923 | 14 3/8 | 15 1/2 | 14 3/8 | 14 3/4 | |
| Dec. 21, 1923 | 15 1/8 | 15 3/4 | 14 7/8 | 15 | |
| Dec. 22, 1923 | 15 1/8 | 15 3/8 | 15 | 15 1/4 | |
| Dec. 23, 1923 | Sunday | ||||
| Dec. 24, 1923 | 15 | 15 5/8 | 15 | 15 3/8 | |
| Dec. 25, 1923 | Xmas | ||||
| Dec. 26, 1923 | 15 5/8 | 16 3/8 | 15 5/8 | 16 3/4 | |
| Dec. 27, 1923 | 16 7/8 | 17 3/4 | 16 1/2 | 17 3/4 | |
| Dec. 28, 1923 | 17 3/4 | 17 3/4 | 16 7/8 | 17 1/4 | |
| Dec. 29, 1923 | 17 3/8 | 17 3/4 | 17 1/4 | 17 1/2 | |
| Dec. 30, 1923 | Sunday | ||||
| Dec. 31, 1923 | 17 3/4 | 17 1/2 | 16 3/8 | 16 7/8 |
*3225 *621 Before entering into the transaction above referred to, Niels Esperson told petitioner that he was going to sell the stock in question for the purpose of taking a loss and that he was going to lend Peters and Brown money with which to buy stock of the same kind. Petitioner had no objection to the proposed action on the part of her husband.
OPINION.
LITTLETON: The first question involved in this case is whether in October, 1921, Niels Esperson made a bona fide sale of 8,100 shares of Invincible Oil Corporation stock. This issue was likewise before us today on the basis of the same facts, in the case of , wherein we held that the sale was not bona fide and, therefore, a loss on account thereof could not be allowed. That decision is, of course, controlling in the case at bar.
But we are not convinced that when this purported sale was being carried out by Niels Esperson, the knowledge, acquiescence and part played by the petitioner, his wife, were sufficient to justify the conclusion of fraud on her part and, accordingly, the motion of the respondent that the*3226 fraud penalty provided in section 250(b), Revenue Act of 1921, be asserted, is denied.
Reviewed by the Board.
Judgment will be entered for the respondent.
LOVE dissents.