*165 Before GRAUPNER, TRAMMELL, and PHILLIPS.
This appeal is from a deficiency in income tax for the year 1919, in the amount of $4,393.15. The sole issue involved is whether or not the taxpayer may deduct as a loss the difference between the amount paid for 32 shares of its own capital stock which it purchased in the year 1915 for the sum of $12,800 and returned to its treasury, and, in the year 1919, sold for the sum of $3,200.
FINDINGS OF FACT.
1. The taxpayer is a corporation organized under the laws of the State of Illinois with its principal place of business in the City of Rockford. The articles of incorporation of the taxpayer provide that:
The object for which it is formed is to manufacture and sell, at wholesale and retail, any and all kinds of furniture and house, office and store furnishings and to do a general furniture business.
They contain no statement authorizing the taxpayer to deal in its own capital stock.
2. In 1915 the taxpayer purchased 32 shares of its own capital stock at a cost of $12,800, which stock was returned to its treasury. *2517 In the year 1919 the taxpayer sold the 32 shares of stock to T. D. Lundberg for the sum of $3,200, which was paid by a promissory note *166 dated December 20, 1919. A certificate of stock for the 32 shares was issued to Lundberg by the corporation.
3. Lundberg had entered the employ of the taxpayer during the year 1899 and had remained constantly in its employ until about two years before 1919. During the year 1919, due to certain labor conditions existing in Rockford, the taxpayer desired to reemploy Lundberg, and, as an inducement to his return, offered to sell him the 32 shares of capital stock at its par value $100of per share. At the time the stock was sold to Lundberg it had a book value in excess of $400.
4. The taxpayer in its income-tax return for the year 1919 sought to deduct the sum of $9,600, this sum being the difference between the $12,800 paid for the 32 shares of stock and the $3,200 received from the sale of the stock to Lundberg, as an ordinary and necessary expense paid or incurred during the taxable year in carrying on its trade or business, or as a reasonable allowance for compensation for personal services actually rendered by Lundberg.
*2518 DECISION.
The determination of the Commissioner is approved.