*2913 The Commissioner's denial of the right to inventory securities as a dealer approved.
*743 This is a proceeding for the redetermination of deficiencies in income and profits taxes for the following calendar years in the following amounts:
| 1918 | $107,149.64 |
| 1919 | 58,705.78 |
| 1920 | 42,680.87 |
| 1923 | 11,797.77 |
| Total | 220,334.06 |
The sole issue is whether or not the petitioner is a dealer in securities so as to entitle it to inventory its securities at market, there having been reserved for future determination under Rule 62 the question of the right to special assessment.
FINDINGS OF FACT.
The petitioner is a corporation organized under the national banking laws doing business in the State of New York. During the taxable year and for some time prior thereto it purchased and sold various corporate and Government bonds. It maintained a special department for this purpose. In purchasing these securities the officers in charge were concerned primarily with the safety of the securities.
The petitioner*2914 kept its books on the basis of cost in accordance with the requirements of the national banking law. No separate account was kept to reflect any profit or loss from the sale of securities but such profit or loss was accounted for in the general profit and loss account. A book was kept which would show a list of the securities and the profit or loss upon their sale on an inventory basis. This book was not offered in evidence nor was any other original record relating to these securities.
Statements in evidence made from the bank's records supplemented in part by market values taken from financial publication show the kind, par value, and cost of each security on hand on January 1 of *744 each of the years involved. They also show market values at the beginning and end of each year involved for each security, except that no such values for the first of the year 1918 are shown. These statements have a column for each year headed "Purchases made during the year," and one headed "Sales made during the year." Under these headings are various amounts, each amount being in line with other data relating to a particular kind of security. An analysis of these amounts discloses*2915 for each of the years the number of different kinds of securities purchased or sold and the totals of the amounts in these columns as follows:
| Purchases | Sales | |||
| Amount | Kinds | Amount | Kinds | |
| 1918 | ||||
| Securities other than obligations of the United States | $317,850.00 | 4 | $433,150.00 | 6 |
| United States obligations | 10,687,121.50 | 5 | 7,698,600.00 | 3 |
| 1919 | ||||
| Securities other than obligations of the United States | 1,073,556.55 | 14 | 1,096,500.59 | 14 |
| United States obligations | 10,339,061.91 | 7 | 10,415,350.00 | 3 |
| 1920 | ||||
| Securities other than obligations of the United States | 88,550.00 | 2 | 791,875.62 | 9 |
| United States obligations | 1,084,017.59 | 3 | 1,631,611.49 | 3 |
| 1923 | ||||
| Securities other than obligations of the United States | 33,914.52 | 2 | 76,777.89 | 6 |
| United States obligations | 1,933,854.06 | 2 | 1,745,377.96 | 2 |
These statements do not show any dates of purchases or of sales or whether the totals shown represent one or more or a part only of one transaction. According to these statements the cost of the securities owned by the petitioner on January 1, 1918, was $3,986,332.94, the total market value of the securities on hand on January 1, 1919, was $6,562,357.60, *2916 1 on January 1, 1920, was $6,197,553.28 2 and on January 1, 1923, was $4,030,238.03.
During the taxable years the petitioner had pledged certain of its bonds to secure postal savings and to secure circulation. These bonds could be withdrawn and sold and others substituted. During the taxable years the petitioner withdrew certain of its bills from circulation and withdrew certain of the bonds pledged without making replacements.
OPINION.
MURDOCK: The sole question presented for consideration at this time is whether the petitioner was a dealer in securities during the taxable years and as such entitled to inventory its securities at market *745 in computing its taxable net income. Section 203 of the Revenue Act of 1918 provides for the use of inventories in certain cases where in the opinion of the Commissioner their use is necessary. The Revenue Act of 1921 contains an identical provision. The Commissioner issued Regulations 45 containing article 1585, which was amended by Treasury Decision 3296. This article as amended provided*2917 that a dealer in securities under certain circumstances could use inventories in making his income-tax return. The petitioner does not attack this article of the regulations, but, on the contrary, cites the same as authority for inventorying its securities. The Commissioner has denied the petitioner's claim for a shrinkage in the market value of its securities for the taxable years on the ground that it is not a dealer in securities. The issue being thus narrowed, we are keeping its books and in making its income-tax returns.
The petitioner had a duty to present to us a sufficiently detailed and complete picture of its transactions in securities to enable us to judge intelligently whether or not it was a dealer. We will not say what proof was necessary, for we do not know the facts, and the circumstances in one case might vary greatly from those of any other.
The proof in this case is inadequate and leaves most of the picture hidden. Consequently we are in doubt as to whether the petitioner was a dealer in securities. We know that it purchased and sold various corporate and Government bonds and that it maintained a "separate department" for this purpose, but these facts*2918 are not conclusive of the issue. It might have purchased these securities in order to invest its surplus funds and in order to properly invest its surplus funds it might have maintained a separate department. We only have the words "separate department." We have none of the facts as to how that department functioned. Customers were mentioned by the witnesses in a general way only. We do not know in what way the petitioner held itself out to the public in regard to the securities involved. We do not know that it had a single customer or that it ever tried to get one. An analysis of the meager evidence presented is difficult and leads nowhere. Certain facts, as for example, the length of time the securities were held, the small number of transactions, and the use to which some of the securities were put would tend to support the Commissioner's determination. Other circumstances may have some tendency to show that the petitioner was a dealer in securities, but after carefully considering all the evidence we are unable to determine that the Commissioner was in error.
Further proceedings will be had under Rule 62(b).