*1228 1. Losses sustained on the sale of non-Government securities held for less than two years may not be offset against gains from the sale of Government securities, in view of the parenthetical exception contained in section 23(t) of the Revenue Act of 1932.
2. An initiation fee paid to the New York Stock Exchange upon the transfer of the use of a membership may not be deducted as a business expense in the absence of proof as to whether the use of the membership was bought for a limited period or was transferable as a capital asset.
*154 These are consolidated proceedings to redetermine deficiencies in income and excess profits taxes as follows:
| Taxpayer | Docket No. | Year | Tax | Deficiency |
| 1932 | Income | $153.33 | ||
| Charles J. Bradley | 95576 | 1933 | do | 1,668.46 |
| 1932 | do | 1,713.75 | ||
| William L. Wilson, deceased, by Mary C. Wilson, executrix of his estate. | 95577 | 1933 | do | 2,561.37 |
| John F. Boyle, deceased, by Marguerite M. Boyle, administratrix of his estate. | 95578 | 1932 | do | 1,511.98 |
| 1932 | do | 4,700.75 | ||
| Frank J. Bradley | 95579 | 1933 | do | 3,560.02 |
| 1933 | do | 501.02 | ||
| Bradwill Corporation | 95589 | 1933 | Excess profits | 182.19 |
*1229 Two questions are presented. The first, common to all petitioners, is whether losses sustained in the taxable years on the sale of non-Government securities held for less than two years may be offset against gains from the sale of Government securities. The second, which concerns only Frank J. Bradley, Charles J. Bradley, and the estate of William L. Wilson, is whether an initiation fee paid on the transfer of a membership in the New York Stock Exchange is deductible as an ordinary and necessary business expense.
FINDINGS OF FACT.
In 1932 Frank J. Bradley, Charles J. Bradley, John F. Boyle, and William L. Wilson were members of the stock brokerage partnership of Bradley, Boyle & Wilson of New York City. In 1933 a stock brokerage firm of the same name existed in New York City during each of the following periods: January 1 to February 24; February 25 to March 30; March 31 to August 30; and August 31 to December 31. The two Bradleys and Wilson were members of each of these firms during its existence. The Bradwill Corporation was organized under the laws of the State of New York with offices in New York City.
Each of the above named partnerships and the Bradwill Corporation*1230 were, at all times material herein, dealers in Government securities but were mere traders on their own account and not dealers in non-Government securities.
*155 Each partnership and the Bradwill Corporation sustained losses on sales of non-Government securities held for less than two years and in their returns sought to offset such losses against gains realized from the sale of Government securities, thereby decreasing the distributable share of each partner's partnership income and the net income of the Bradwill Corporation.
The partnership composed of Frank J. Bradley, William L. Wilson, Charles J. Bradley, and Bertrand L. Burbank was organized on March 30, 1933, pursuant to a written agreement and terminated August 30, 1933. In the agreement it was provided that Wilson would cause a membership owned by him in the New York Stock Exchange to be transferred to Burbank. Burbank agreed that on termination of the partnership or on his retirement he would either transfer his membership to Wilson's nominee or sell it and pay the proceeds to Wilson, or retain it and pay Wilson the market price of a membership. Burbank further agreed to contribute the use of the membership*1231 to the partnership, not to sell the membership without Wilson's consent, and to give Wilson a power of attorney to transfer the membership in his discretion. Wilson was to receive interest at the rate of 6 percent per annum on the average value of a membership in the New York Stock Exchange.
During the time that the membership was in Burbank's name it continued to be the property of William L. Wilson.
Before the membership was transferred to Burbank's name it had been in the name of John F. Boyle. Boyle died on February 24, 1933, and the transfer to Burbank's name took place subsequently. This transfer required the payment of an initiation fee of $4,015 to the New York Stock Exchange, pursuant to the latter's requirements as to the transfer of a membership following the death of a member. This fee was paid by the partnership during the period of its existence, March 30 to August 30, 1933, and was deducted as an ordinary and necessary business expense in the partnership return for that period. Respondent disallowed the deduction of this fee on the ground that "the amount paid * * * is a capital expenditure and as such is not deductible."
Following the termination of the*1232 partnership on August 30, 1933, a new partnership was formed, one new member being added, and it continued for the balance of 1933.
OPINION.
LEECH: The first issue is whether the losses sustained by the partnership and the corporation on the sale of non-Government securities may be offset against gains realized on sales of Government securities. It is stipulated that the partnership and the corporation were dealers *156 in Government securities, but were merely traders and not dealers in non-Government securities.
Section 23(r)(1) of the Revenue Act of 1932 reads as follows:
(1) Losses from sales or exchanges of stocks and bonds (as defined in subsection (t) of this section) which are not capital assets (as defined in section 101) shall be allowed only to the extent of the gains from such sales or exchanges * * *.
Subdivision (3) of section 23(r) states: "This subsection shall not apply to a dealer in securities * * *."
Stocks and bonds are defined in subsection (t) as follows:
As used in subsections (r) and (s), the term "stocks and bonds" means (1) shares of stock in any corporation, or (2) rights to subscribe for or to receive such shares, or (3) bonds, *1233 debentures, notes, or certificates or other evidences of indebtedness, issued by any corporation (other than a government or political subdivision thereof) * * *.
The meaning thus expressed parenthetically by Congress in subsection (t) is clear and unambiguous. No interpretation or construction from legislative history or otherwise is therefore possible. ; ; ; . It is plain that such parenthetical expression is fatal to petitioners' contention. The fact that their only gains arose from sales of Government securities leaves no gains, existing, of a type against which their losses may be offset. We hold that petitioners may not offset their losses against gains from sales of Government securities.
The second issue is whether the partnership is entitled to deduct the initiation fee, which it paid to the New York Stock Exchange upon the transfer of the membership, as a business expense. (Revenue Act of 1932, sec. 23(a).) Respondent disallowed*1234 the deduction for the reason, as stated in the deficiency notice, that "the amount paid * * * is a capital expenditure and as such is not deductible." If this is so, of course, the item is not deductible as an expense.
Petitioners have the burden of establishing the error of which they complain. Particularly is this so here, where the evidence, if there be any, is within their control. See ; reversed on another ground, ; ; Wigmore on Evidence, § 285.
Here, petitioners have not shown whether they merely bought the use of the membership for a limited period or it was a capital asset and transferred as such to the successor partnership. And, assuming that it was the former, there is nothing in the record indicating that the value of the right to use the membership was totally exhausted *157 on August 30, 1933, or continued to be valuable to the successor firm - thus rendering impossible any determination of the taxable year or years to which the expense, even if it were such, is allocable. See *1235 ; affd., . No error in denying the deduction of this item having been established, respondent is affirmed on this issue.
Since the parties have agreed on certain items placed in issue by the pleadings,
Decisions will be entered under Rule 50.
Footnotes
1. Proceedings of the following petitioners are consolidated herewith: William L. Wilson, Deceased, by Mary C. Wilson, Executrix of his Estate; John F. Boyle, Deceased, by Marguerite M. Boyle, Administratrix of his Estate; Frank J. Bradley; and Bradwill Corporation. ↩