*4229 1. A person may at the same time be regularly engaged in more than one kind of trade or business.
2. For 21 years prior to 1923 petitioner was regularly engaged in business as a wholesale liquor dealer. In the latter part of 1922 he ceased making purchases of additional stock but continued active efforts to sell and did sell during the year 1921 a quantity of the liquor on hand, from which he sustained a loss. Held, that this was a business regularly carried on during 1923 and the net loss sustained in the operation thereof was deductible from net income for the year 1924.
3. From 1915 to and including the year 1923 petitioner was president and treasurer, and sole stockholder of a corporation engaged in the business of buying, selling, and renting real estate. In some instances petitioner entered into real estate contracts in his own name, transferring them later to the corporation. In 1920 he purchased in his own name a house and lot that he sold in 1923 at a loss. Held, that this was not a loss sustained in the operation of a business regularly carried on by petitioner within the meaning of section 204 of the Revenue Act of 1921, that may be carried forward*4230 and deducted from net income for the year 1924.
*1356 The Commissioner determined a deficiency in income tax of $957.78 for the calendar year 1924. It is claimed that the Commissioner erred in refusing to allow any deduction from 1924 income of the amount of net losses alleged to have been sustained in the year 1923 from a liquor business and a real estate business claimed to have been regularly carried on during that year.
The position of the Commissioner is, first, that petitioner sustained no losses in 1923 and, secondly, if he did, they were not attributable to the operation of a trade or business regularly carried on by the taxpayer.
FINDINGS OF FACT.
Petitioner is a resident and citizen of the State of New York. For 21 years prior to the adoption of the Eighteenth Amendment to the Constitution of the United States and the enactment of legislation for its enforcement, petitioner was continuously engaged in business as a wholesale and retail liquor dealer. After the enactment of prohibition legislation he applied for and was granted a permit*4231 to purchase and sell liquor for medicinal purposes. He continued his liquor business in this manner until 1922. Thereafter he ceased purchasing liquors in the conduct of his business but continued active efforts throughout the year 1923 to sell the liquor on hand. He had a large quantity of liquor stored in bond and during the year 1923 he sold a portion thereof, amounting to 470.4 cases and 40 barrels of liquor, to permit holders. He sustained a net loss in 1923 in the operation of this business of $2,408.65.
In 1915 petitioner organized a New York corporation to engage in the business of buying, selling, and renting real estate. From 1915 to and including 1923 petitioner was president, treasurer, and the sole stockholder of the corporation. He was actively engaged in the management of his affairs. In some instances petitioner entered into real estate contracts in his own name and transferred *1357 them later to the corporation. In 1920 he purchased in his own name a house and lot for which he paid $37,500 and a commission of $500, or a total purchase price of $38,000. He believed at the time that this property was a good investment and that with certain improvements*4232 upon the building he could sell it at a good profit. The large dwelling house of about 20 rooms upon the lot was in a very dilapidated condition. Petitioner considered the value of the land to be equal to the price paid for the entire property. He practically reconstructed the house - the additions and improvements costing $56,233.74, making the total cost of the property, when sold in 1923, $94,233.74. The property was sold in 1923 for a net price of $74,150 after payment of the commissions and other necessary expenses of sale. The exhaustion, wear and tear of the building during the period of ownership by the petitioner was $3,374. The loss sustained upon the sale was therefore $16,709.74.
During the year 1923 petitioner received a salary from the corporation of which he was president of $10,000, interest of $1,159.47, and dividends of $30, making a total of $11,189.47. He paid local taxes of $69.75, leaving an income of $11,119.72. The Commissioner determined that petitioner's net income for the year 1924 was $20,025. There is no controversy as to this.
OPINION.
LITTLETON: Section 204 of the Revenue Act of 1921 governing the questions here presented provides:
*4233 (a) That as used in this section the term "net loss" means only net losses resulting from the operation of any trade or business regularly carried on by the taxpayer (including losses sustained from the sale or other disposition of real estate, machinery, and other capital assets, used in the conduct of such trade or business); and when so resulting means the excess of the deductions allowed by section 214 or 234, as the case may be, over the sum of the following: (1) the gross income of the taxpayer for the taxable year, (2) the amount by which the interest received free from taxation under this title exceeds so much of the interest paid or accrued within the taxable year on indebtedness as is not permitted to be deducted by paragraph (2) of subdivision (a) of section 214 or by paragraph (2) of subdivision (a) of section 234, (3) the amount by which the deductible losses not sustained in such trade or business exceed the taxable gains or profits not derived from such trade or business, (4) amounts received as dividends and allowed as a deduction under paragraph (6) of subdivision (a) of section 234, and (5) so much of the depletion deduction allowed with respect to any mine, oil*4234 or gas well as is based upon discovery value in lieu of cost.
(b) If for any taxable year beginning after December 31, 1920, it appears upon the production of evidence satisfactory to the Commissioner that any taxpayer has sustained a net loss, the amount thereof shall be deducted from the net income of the taxpayer for the succeeding taxable year; and if such net loss is in excess of the net income for such succeeding taxable year, the amount *1358 of such excess shall be allowed as a deduction in computing the net income for the next succeeding taxable year; the deduction in all cases to be made under regulations prescribed by the Commissioner with the approval of the Secretary.
Although petitioner's liquor business as it had formerly been carried on was somewhat restricted by prohibition legislation and his conclusion at the end of 1922 to discontinue as soon as he could dispose of the liquor on hand, we are of the opinion from the evidence that he was regularly engaged in the sale of liquor as a business in the year 1923 and that the loss sustained in the operation of that business, amounting to $2,408.65, is deductible from net income for the year 1924.
From the*4235 evidence in this proceeding we are of the opinion that the real estate loss of $16,709,74 sustained by the petitioner in the sale of property hereinbefore mentioned was not a loss sustained in the operation of a trade or business regularly carried on by the petitioner within the meaning of section 204 of the Revenue Act of 1921.
The position of the Commissioner is that petitioner had no regular business, that he was merely an officer and employee of the corporation, all of the stock of which he owned. The question here is not whether the corporation may deduct the petitioner's net loss, nor whether the petitioner may deduct a loss of the corporation. For this reason this proceeding is to be distinguished from Wm. J. Robb,5 B.T.A. 827">5 B.T.A. 827, and W. C. Harris,8 B.T.A. 1234">8 B.T.A. 1234.
Petitioner's activities during the year 1923, outside of his liquor business, were confined almost entirely to the management and furtherance of the business of the real estate corporation. It appears from the evidence that over the period from 1915 to 1923, inclusive, he occasionally and for convenience made real estate contracts in his own name but these transactions were for*4236 and on behalf of the corporation and can not be regarded as establishing that petitioner, as an individual, was regularly engaged in the real estate business within the meaning of the statute. The purchase in 1920 and sale at a loss in 1923 of the house and lot in New Jersey is the only real estate transaction in which petitioner engaged as an individual over a period of nine years. The testimony of petitioner as to whether this transaction was strictly a personal one or whether it was for or on behalf of the corporation is conflicting. Upon cross-examination petitioner testified:
Q. Did you individually purchase it, or the corporation?A. If I purchased any property in some instances and they wanted me to go on the bond personally, I would take it in my name and transfer it to the corporation.
Q. Did you purchase the property for the corporation or yourself?
*1359 A. If it is for the corporation or myself, it is the same thing, because I own the corporation.
* * *
Q. Did you transfer the New Jersey property to the corporation?
A. No, I did not. Q. Did you purchase it for the corporation? A. Yes.Upon redirect examination the petitioner*4237 testified as follows:
Q. You testified, Mr. Goldberg, that the property in Deal, New Jersey, was bought for the corporation. Did you mean to so testify?
A. Well, I always felt when I bought for the corporation or myself, it was all the same.
Q. Which way did you buy it?A. I did not buy it initially for the corporation. I bought it to sell.
Q. Who took title to it? A. I took title to it. Q. Did you transfer it to the corporation? A. This property? Q. Yes. A. No, I never transferred it. Q. Who sold it? A. My attorneys. Q. Who signed the deeds under which it was sold? A. I signed the deeds.Assuming, however, that this real estate transaction was strictly carried out by petitioner on his own account as an individual, it was a single transaction in which he made an investment with the view of making a profit and was not sufficient to constitute a trade or business regularly carried on by him within the meaning of the statute. J. J. Harrington,1 B.T.A. 11">1 B.T.A. 11; *4238 Fridolin Pabst,6 B.T.A. 843">6 B.T.A. 843; Harry J. Gutman,7 B.T.A. 500">7 B.T.A. 500. Cf. Pan-American Bank & Trust Co.,5 B.T.A. 839">5 B.T.A. 839.
The Board is of the opinion that the real estate loss in question was not such a loss as may, under the statute, be used in determining the net loss for 1923 which may be carried forward and deducted from net income for the taxable year 1924. Petitioner's income, deductions, and losses for the year 1923 were as follows:
| Income: | ||
| Salary | $10,000.00 | |
| Interest | 1,159.47 | |
| Dividends | 30.00 | |
| $11,189.47 | ||
| Deductions: Taxes paid | 69.75 | |
| 11,119.72 | ||
| Net loss from liquor business | 2,408.65 | |
| Real estate loss | 16,709.74 |
*1360 Under section 204(a) of the Revenue Act of 1921 petitioner is entitled to carry forward and deduct from net income for 1924 only the net loss of $2,408.65 sustained in 1923 in the operation of his liquor business. Cf. H. J. Schlesinger,5 B.T.A. 943">5 B.T.A. 943.
Judgment will be entered on 15 days' notice, under Rule 50.