*1625 Section 212(d) of the Revenue Act of 1926 does not permit taxpayers to take deductions for losses upon the installment basis.
*528 These are proceedings, duly consolidated for hearing and opinion, for the redetermination of deficiencies in income tax as follows:
| Docket No. | Year | Deficiency |
| 44776 | 1926 | $11,685.89 |
| 50946 | 1927 | 15,310.25 |
*529 It is alleged that the respondent erred in failing to allow petitioner deductions in the amounts of $47,304.24 and $110,377 in the years 1926 and 1927, respectively, as representing losses sustained by him in those years as a result of his sale in 1925 on the installment plan of certain capital stock of the Larkin Company, Inc. It was also alleged in Docket No. 44776 that respondent erred in failing to allow as a deduction a loss sustained by petitioner in the amount of $10,915 under a guarantee of his investment of another, but this assignment of error was abandoned by petitioner.
The proceedings were submitted upon the pleadings and a stipulation*1626 of facts.
FINDINGS OF FACT.
During the taxable year 1926, petitioner was not actively engaged in any business. He owned 17,000 shares of common and 20,000 shares of preferred stock of Larkin Company of Buffalo, N.Y., which had been acquired by him prior to March 1, 1913. The March 1, 1913, fair market value of this stock was $1,933,328. Petitioner sold the same to the Larkin Company in the year 1925 for a total consideration of $1,670,000. At the date of sale, he received cash in the amount of $170,000 in full payment for 17,000 shares of common stock, and cash in the amount of $200,000 as part payment for the 20,000 shares of preferred stock, the balance of the selling price, or $1,300,000, being represented by 26 notes of Larkin Company bearing interest at 5 per cent per annum, payable over a period of five years, with option of payment in full with interest on any interest date. A loss amounting to $263,328 was sustained by him from the sale. In his individual income-tax return for the taxable year 1925, petitioner claimed as a deduction that part of the total loss which the payments received in that year bear to the total sales price. The respondent, over the objection*1627 of the petitioner, allowed the entire loss as a deduction in the year 1925.
During the taxable year 1926, petitioner received payments on the notes to the amount of $300,000; and in his individual income-tax return for the taxable year 1926, he claimed as a deduction that part of the total loss which the payments of $300,000 received in that year bear to the total sales price of $1,670,000, being 300/1670 of the total loss of $263,328, or $47,304.24. Upon an audit of said return, the respondent disallowed this latter amount as a deductible loss.
In the year 1927, the payments which petitioner received on the notes amounted to $700,000, and on his income-tax return for that year the petitioner claimed a deduction in the amount of $110,363.40, representing 700/1670 of $263,328. This deduction was disallowed by the respondent.
*530 OPINION.
MCMAHON: The parties are in agreement that the petitioner sustained a loss in the amount of $263,328 as a result of the sale by him in 1925 of his stock in the Larkin Company, Inc., of Buffalo, N.Y., for $1,670,000. The only question presented for decision is when petitioner may deduct the loss.
The applicable statutes are*1628 sections 214(a)(5), 202(a)(c)(d)(e), 203(a), 204(b) and 212(d) of the Revenue Act of 1926.
The respondent has held that the entire loss was sustained by the petitioner in 1925. The petitioner contends that under the provisions of section 212, supra, he is entitled to take a proportionate part of the loss during each of the years of the period over which the notes were paid. It is the position of the respondent that section 212(d) refers only to the return of income upon transactions in which gain is derived. Petitioner contends that section 212(d) is not limited to such cases, but that the term "income" as used therein comprehends likewise a "minus" item or a "negative quantity" as well as a "positive quantity" or "plus" item. To support such contention, petitioner argues that in the ordinary case where a taxpayer's deductions exceed his gross income, the return which petitioner is required to make of such resulting negative quantity in nevertheless a return of "income," just as a return of a resulting positive figure would be a return of income.
Whether or not the argument of the petitioner as to the ordinary case is correct, it is our opinion that it is not determinative*1629 of the question here presented. Section 212(d) of the Revenue Act of 1926 makes no reference to a return of losses upon the installment basis. Furthermore, other sections of the Revenue Act of 1926, which we have set forth above, do embrace such a situation as is herein presented and provide for the deduction of such a loss in the year in which the transaction occurred. As stated in Botany Worsted Mills v. United States,278 U.S. 282">278 U.S. 282, "When a statute limits a thing to be done in a particular mode, it includes the negative of any other mode. Raleigh, etc. R.R. Co. v. Reid,13 Wall. 269">13 Wall. 269, 270; Scott v. Ford,52 Or. 288">52 Ore. 288, 296."
The Supreme Court has also stated in Gardner v. Collins,2 Peters 58">2 Pet. 58, 92, "What the legislative intention was, can be dervied only from the words they have used; and we can not speculate beyond the reasonable import of these words."
The same question was presented for consideration in George P. Sacks,23 B.T.A. 307">23 B.T.A. 307, wherein we stated:
The stipulated facts leave it doubtful whether the transaction was in any event within section 212(d). But aside from that, *1630 there is no reason to read *531 the statute as applying the installment method to such a loss. As to a regular installment dealer, the installment method is expressly applied to profits. As to casual transactions, the word "income" is used. Both, in our opinion, exclude the spreading of a loss. This has been the Commissioner's ruling since before 1925. I.T. 2063, C.B. III-2, p. 108. The statute imports the Commissioner's regulations as to installment sales, and these do not provide for spreading such a loss.
We hold that the petitioner is not entitled to any deductions in the years 1926 and 1927 on account of the loss sustained upon the sale of the stock in question.
Reviewed by the Board.
Judgment will be entered for the respondent.