*2094 The petitioner having invoked section 204 of the Revenue Act of 1926 for the relief sough and having failed to sustain the burden of proof thereunder, we must approve the respondent's determination, particularly in view of the fact that a computation of the loss under that section, when considered in the light of all the information before us, results in the same amount of loss found by the respondent.
*668 This proceeding is for the redetermination of a deficiency in income tax of $3,888.85 for the calendar year 1925.
The petitioner alleges error on the part of the respondent in that he used the 1915 value of the stock and a bond of the Advanced Rumely Company as the basis for determining gain or loss upon the *669 sale thereof in 1925 instead of the cost of the M. Rumely Company stock, for which the Advanced Rumely Company securities were received in exchange, plus the assessment paid at the time of the reorganization of the M. Rumely Company. The cause was submitted for consideration upon the pleadings.
FINDINGS OF FACT.
The petitioner*2095 is an individual with residence in the city of Rochester, N.Y.
In 1911 the petitioner purchased 150 shares of preferred stock of the M. Rumely Company at a cost to her of $14,550, and in 1912 she purchased 300 shares of the common stock of the said M. Rumely Company at a cost to her of $29,662.50. In 1915 she paid an assessment on the stock so purchased of $5,250.
In 1915 the M. Rumely Company was reorganized and the petitioner received 150 shares of common stock and a $5,000 bond of the Advanced Rumely Company in exchange for her shares of stock in the M. Rumely Company pursuant to the plan of said reorganization.
Commenting on the loss upon the sale of the foregoing securities in 1925, the respondent says in his deficiency notice to the petitioner:
* * * For the stock of the M. Rumely Company, costing a total of $49,462.50, you received 150 shares of common stock of the Advance Rumely Company valued at $24.00 per share or a total of $3,600.00. In addition to the stock, you received a $5,000.00 bond valued at $4,750.00 (price at which issued). The value in 1915 of the securities received represents the cost in determining the profit or loss in 1925, the year in which*2096 they were sold. The securities were sold for $7,162.75. Inasmuch as they had a value in 1915 of $8,350.00, the correct loss is $1,187.25.
OPINION.
MORRIS: The petitioner contends that the correct basis for determining the loss upon the sale of her securities in the Advanced Rumely Company is the cost of the stock of the M. Rumely Company plus the amount of the assessment thereon at the time of reorganization in 1915.
That part of section 204 of the Revenue Act of 1926 cited by both petitioner and the respondent, provides:
(a) The basis for determining the gain or loss from the sale or other disposition of property acquired after February 28, 1913, shall be the cost of such property; except that -
(6) If the property was acquired upon an exchange described in subdivision (b), (d), (e), or (f) of section 203, the basis shall be the same as in the case of the property exchanged, decreased in the amount of any money received by the taxpayer and increased in the amount of gain or decreased in the amount of loss to the taxpayer that was recognized upon such exchange under the law applicable to the year in which the exchange was made. * * *
This *670 exchange is one*2097 described in subdivision (b) of section 203.
The petitioner's contention, reduced to the terms of the statute, is that "the basis shall be the same as in the case of the property exchanged;" that is, it shall be the same as though the original stock of the M. Rumely Company, acquired prior to March 1, 1913, were the property in question, and since the exchange took place under the was governed by the Revenue Act of 1913, and since, as the petitioner contends, said act recognized no loss upon such exchange the loss should now be the difference between the cost of the original shares, $49,462.50, and the selling price, $7,162.75, or $42,299.75.
The dispute, therefore, resolves itself into a question of whether any loss sustained upon the exchange in 1915 "was recognized * * * under the law applicable to the year in which the exchange was made." The petitioner contends that it was not and the respondent contends otherwise.
The Revenue Act of 1913 provides:
[Sec. II B.] * * * That in computing net income for the purpose of the normal tax there shall be allowed as deductions: * * * fourth, losses actually sustained during the year, incurred in trade * * *.
We should know*2098 something about the nature of the reorganization in 1915, which resulted in the exchange of M. Rumely Company stock for that of Advanced Rumely Company, but in this, as in all other particulars, the record is extremely deficient. In order for us to sustain the petitioner's view we must find that no loss was "actually sustained" in 1915 within the meaning of the Act of 1913. The record not only does not give us sufficient data upon which to base a conclusion that there was no loss in 1915, but as a matter of fact the information which we do have indicates, presumptively at least, that there was in fact a loss. At any rate, the respondent seemed to think that a loss had been sustained - and it is the respondent's determination which we must approve unless the petitioner is able to sustain the burden of proof - because it will be seen that in determining the basis for the loss sustained in 1925 he found the cost of the original stock to be $49,462.50, whereas the value of the stock received in exchange was only $8,350, indicating a loss in that year of $41,112.50, based upon cost of said original shares. In view of this determination by the respondent and the lack of evidence to overcome*2099 the prima facie correctness of the respondent's determination in this particular, we can not say that no loss was "actually sustained" so as to have precluded a deduction under the 1913 Act. Cf. , and , wherein the question of taxable gain under the Revenue Acts of 1913 and 1916 was considered.
*671 Furthermore, the statute compels us to determine whether the transaction in 1915 was merely a casual exchange of securities or whether the petitioner was so actively engaged in the purchase, sale, and exchange of securities that this transaction, being only one of many, should be treated as one consummated "in trade" within the meaning of the Act of 1913. In order to sustain the petitioner in this particular it is necessary for us to determine from the facts before us that this exchange falls within the former rather than into the latter class. That is, we must find that it was not a transaction in trade" which would permit the deduction of any loss sustained upon the exchange in 1915. With respect to this the record tells us nothing of importance. All that we know*2100 is that the petitioner is an individual, as distinguished from a partnership or corporation, and that she purchased certain shares of stock in 1911 and 1912 and exchanged them for certain other shares and a bond of the new company in reorganization in 1915. We can not conclude from such meager facts that whatever loss was sustained in 1915 through the exchange of M. Rumely for Advanced Rumely stock was not one "incurred in trade" and, therefore, not deductible in the computation of net income for that year. As a matter of fact a statement of stock and bond transactions appended to the deficiency notice would tend to indicate very strongly that the petitioner was a rather active trader in securities.
The petitioner having invoked section 204, supra, for the relief sought, and having failed to sustain the burden of proof thereunder, we must approve the respondent's determination, particularly in view of the fact that a computation of the loss under that section, when considered in the light of all the information before us, results in the same amount of loss found by the respondent.
For instance, the cost of the M. Rumely stock, including assessment, was $49,462.50, for which*2101 the petitioner received securities of Advanced Rumely valued, according to the respondent's determination, at $8,350, indicating a loss of $41,112.50 upon the exchange in 1915, recognized as a deductible loss in that year. Therefore, the deductible loss in the taxable year, computed under section 204, supra, using the only value factors available, is $1,187.25 (which exactly agrees with the amount determined by the respondent), computed in the following manner:
| Total cost of original shares (M. Rumely | $49,462.50 |
| Sale price in 1925 (Advanced Rumely) | 7,162.75 |
| Total loss in 1925 before adjustment in accordance with 204(a)(6) of the Revenue Act of 1926 | 42,299.75 |
| Deduct: Loss recognized upon exchange in 1915 | 41,112.50 |
| Deductible loss in taxable year under section 204, supra | 1,187.25 |
Decision will be entered for the respondent.