*2049 Under the Revenue Act of 1918, losses resulting from the sale of assets acquired prior to March 1, 1913, can not be determined unless cost, March 1, 1913, value and sale price are proved.
*432 The Commissioner determined a deficiency of $877.19 in income tax for 1920 against Charles L. Wallis. The taxpayer filed his petition seeking redetermination and alleged that the Commissioner erred in refusing a deduction of a loss of $4,999.50 resulting from the sale in 1920 of 50 shares of stock of the Bowers Southern Dredging Co. of Galveston, Tex. The taxpayer died and his executors were substituted as petitioners.
FINDINGS OF FACT.
The decedent, Charles L. Wallis, was a resident of the State of Texas and died on August 4, 1928, during the pendency of this proceeding. In 1910 he purchased 50 shares of the capital stock of the Bowers Southern Dredging Co. of the par value of $100 each, and paid therefor the sum of $5,000. It is alleged that on December 29, 1920, the decedent sold these shares of stock to his son, Joseph E. Wallis, through a broker's*2050 office in Los Angeles, Calif., for 1 cent a share, or 50 cents for the entire 50 shares, and on account of such alleged sale decedent claimed a deductible loss of $4,999.50, which the Commissioner refused to allow.
The Bowers Southern Dredging Co. was a corporation engaged in the operation of boats and dredges used in dredging operations. It operated at Galveston, Tex., and various other parts of the United States.
*433 After 1914 the business of the Dredging Co. fell off until in 1919 the decedent and his son, Joseph E. Wallis, concluded the stock was worthless and unsuccessful efforts were made to sell it through a bank in Galveston. In 1919 or the early part of 1920, the Dredging Co. was declared a bankrupt and put in the hands of a receiver. During the latter part of 1920 decedent and his son, Joseph E. Wallis, were residing in Los Angeles. Decedent placed the stock in the hands of Allen H. Crary, a broker, for sale, who telegraphed to New Orleans and Houston and was advised there was no market for the stock. A purported sale was then made to Joseph E. Wallis for 1 cent a share of a total of 50 cents. Joseph received the certificate but never had it transferred*2051 to his name on the books of the company. The Bowers Southern Dredging Co. was reorganized under the name of the Clark Dredging Co. and holders of stock in the old company received one share of stock in the new company for two shares in the old company, and each share of stock in the Clark Dredging Co. subsequently had a value of $140 per share. Under this arrangement in 1924 Joseph E. Wallis had 5 shares issued to each of his three sisters, 5 to his father and 5 to himself, in the Clark Dredging Co., in exchange for his 50 shares in the old company.
OPINION.
BLACK: In cases of this kind under the Act of 1918, in order to ascertain taxable gain or deductible loss, where property was acquired prior to March 1, 1913, it is necessary to prove (1) cost of property, (2) its fair market price or value as of March 1, 1913, and (3) the sale price. It is evident in this case that the sale was made for the purpose of making a deductible loss for income-tax purposes. This is permissible under the Act of 1918, provided there was in fact an actual bona fide sale.
Petitioners claim that this was such a sale, but in view of our conclusion it is not necessary to pass on the bona fides*2052 of the transaction. Petitioners have not proved the fair market price or value of the stock on March 1, 1913. Likewise there is no evidence of the assets or liabilities of the Bowers Southern Dredging Co. on that date and there is no basis upon which to determine a loss, if any. This is absolutely essential and it results that the petitioners have failed to establish their claim. ; ; ; .
Judgment will be entered for the respondent.