*1119 Petitioner's husband, as her attorney in fact, sold for her through a broker over a period of several days certain bonds owned by petitioner individually. A day or so after such sales petitioner's husband, as trustee of a trust of which petitioner was life beneficiary, purchased through a broker similar bonds for the trust. Neither the purchasers of petitioner's bonds nor the vendors of the bonds purchased for the trust are known, the sales and purchases having been made in the regular manner through a broker dealing on the New York Stock Exchange. Held, that petitioner sustained a loss on the sale of the bonds; held, further, that the sale was not an indirect sale from petitioner to her husband as trustee and hence the loss thereon is not denied deduction by section 24(a)(6) of the Revenue Act of 1936 as amended by section 301(a) of the Revenue Act of 1937.
*478 Respondent determined a deficiency in petitioner's income tax for the year 1937 in the amount of $10,704.59. The sole issue is whether or not respondent erred in disallowing a deduction*1120 for capital loss on the sale of certain securities. Most of the facts were stipulated. Additional facts were adduced from testimony presented at the hearing.
FINDINGS OF FACT.
Petitioner is the widow of Henry R. Ickelheimer and resides in New York, New York. Petitioner's Federal income tax return for the taxable year was filed with the collector for the second district of New York.
On January 23, 1920, petitioner's father, Philip Lehman, executed a deed of trust under which petitioner was made life beneficiary of the trust. The trust instrument provided that upon the death of petitioner, unless the trust should be otherwise terminated, the trustees should:
* * * divide the principal of said trust fund amongst the issue of my said daughter in such proportion and in such manner as she may by a duly executed and valid last will and testament direct; and in the event of her failure, in whole or in part, to dispose of the principal of said trust fund by a duly executed and valid last will and testament, then and in that case, to divide the principal of said trust fund amongst the children of my said daughter, share and share alike, the issue of any deceased child to take*1121 the share its parents would have taken if living, per stirpes and not per capita. If any child or the issue of any deceased child shall be a minor at the date of the death of my said daughter, then and in that case the trustees may, in their discretion, *479 retain the share allotted to such minor during its minority, and pay over for the benefit of such minor, or for its education, maintenance, and support, the whole or any portion of the income of such share, as they in their discretion may deem fit and proper, and accumulate the remaining portion, if any, until such minor shall have reached its majority, whereupon the principal of the fund retained for such minor, together with all accumulated dividends, interest or profits, shall be paid over to it. In the event of my said daughter dying without issue her surviving, then and in that case I direct that the principal of the trust fund shall be paid to my son ROBERT LEHMAN, or if he then be dead, to his issue him surviving in equal shares, per stirpes and not per capita. And if there be no issue of my said son then living, then I direct said trustees to pay over said fund to my wife, CARRIE LEHMAN, if she be*1122 then living, and if she then be dead, I direct said trustees to pay over said fund to the Federation for the Support of Jewish Philanthropic Societies of New York City.
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The trust instrument appointed petitioner's husband one of the three trustees to administer the trust. Petitioner's husband served in the capacity of trustee of this trust until his death on December 8, 1940. Petitioner has never been trustee of this trust.
On January 19, 1934, petitioner executed a power of attorney under which her father and her husband were jointly and severally empowered to act in her behalf in all financial matters.
On December 10, 1935, petitioner's attorneys in fact under the power of attorney executed January 19, 1934, purchased for her personal account $50,000 face value of Postal Telegraph & Cable Corporation 5 percent bonds due 1953 at a cost of $18,375. On July 22 and 23, 1936, a further $50,000 face value of the same bonds were purchased in the same manner at a cost of $15,372.50. All of these purchases were made on the New York Stock Exchange by Heidelbach, Ickelheimer & Co., of which petitioner's husband was a member, and which maintains a current account for petitioner. *1123 The cost of these bonds was charged to petitioner's personal account with the firm. Petitioner's personal account had more than a sufficient credit balance to pay for the purchases of the bonds and the bonds were thereafter carried in petitioner's personal safe-custody account.
The $100,000 face value of Postal Telegraph & Cable Corporation bonds purchased by petitioner on December 10, 1935, and July 22 and 23, 1936, were sold by petitioner's husband for petitioner under the power of attorney as follows:
| Date | Face value | Proceeds |
| Sept. 21, 1937 | $20,000 | $3,198.67 |
| Sept. 23, 1937 | 30,000 | 4,522.38 |
| Sept. 27, 1937 | 31,000 | 4,442.39 |
| Sept. 28, 1937 | 12,000 | 1,662.45 |
| Sept. 30, 1937 | 7,000 | 1,084.97 |
| Total | 100,000 | 14,910.86 |
*480 The orders for these sales were given to Heidelbach, Ickelheimer & Co., and were executed by that firm on the New York Stock Exchange in the regular manner. The proceeds from these sales were credited to petitioner's personal account on the broker's books.
Petitioner's husband, acting as trustee for the trust, purchased $100,000 face value of Postal Telegraph & Cable Corporation bonds for the trust as follows:
| Date | Face value | Cost |
| Sept. 22, 1937 | $20,000 | $3,200.00 |
| Sept. 24, 1937 | 30,000 | 4,500.00 |
| Sept. 29. 1937 | 43,000 | 6,483.75 |
| Oct. 1, 1937 | 7,000 | 1,120.00 |
| Total | 100,000 | 15,303.75 |
*1124 These bonds were purchased through Heidelbach, Ickelheimer & Co., which maintains a current account for the trust. The orders for the purchases of the bonds were executed by that firm on the New York Stock Exchange in the regular manner. The cost of the bonds was charged to the capital account of the trust. That account contained ample funds to cover the cost of the bonds. The bonds were then placed in the safe-custody account of the trust.
Of the total of 100 Postal Telegraph & Cable Corporation bonds purchased by petitioner's husband as trustee, four bonds bore the same serial numbers as those sold by petitioner. The remaining 96 bonds bore different serial numbers.
Prior to the sales of the bonds by petitioner and the purchases by petitioner's husband as trustee, petitioner's husband consulted with counsel as to whether a loss deduction might be taken by petitioner on such sales and as to the effect of section 118 of the Revenue Act of 1936 relating to "wash sales" of securities. Petitioner's husband was informed by dounsel that section 118 would not apply to purchases of similar securities by the trust, since the trust was an entity separate from petitioner. Counsel*1125 advised petitioner's husband that the purchases by the trust should be at least a day apart from the sales by petitioner. On her income tax return for the taxable year petitioner deducted the difference between the cost of the Postal Telegraph & Cable Corporation bonds and the proceeds received from the sales of such bonds as a capital loss. The respondent disallowed the deduction.
OPINION.
HILL: The only question for our determination is whether or not petitioner sustained a deductible loss on the sale of certain bonds. Petitioner contends that the bonds were sold through her broker on the open market and that no sale or exchange of those bonds, direct or indirect, *481 was made to the trust of which she was beneficiary and her husband trustee. Respondent argues that petitioner is not entitled to the loss deduction because the sale was an indirect sale to the trustee of the trust of which she was beneficiary, losses on such transactions being nondeductible under section 24(a)(6) of the Revenue Act of 1936 as amended by section 301(a) of the Revenue Act of 1937. 1
*1126 There is no question that the loss was sustained. The issue is whether the deductibility of the loss is prohibited by section 24(a)(6) of the Revenue Act of 1936 as amended. If the sale of the bonds was a sale, direct or indirect, to the fiduciary of the trust of which petitioner is beneficiary, the loss is not deductible. It is patent that the sale of bonds by petitioner was not a direct sale of the bonds to her husband as trustee of the trust. The bonds were sold through a broker to undisclosed purchasers. Petitioner's husband as trustee purchased similar bonds from undisclosed vendors.
Respondent urges, however, that the sales of the bonds by petitioner closely followed by purchases of similar securities by her husband as trustee of the trust were indirect sales from petitioner to the trustee. The suthorities cited by petitioner and respondent are of little assistance to our determination of the cause; to our knowledge the problem of what constitutes an indirect sale under section 24(a)(6) of the Revenue Act of 1936 as amended has not been determined by the Board or the courts.
While the parties have stipulated that the transactions were handled with due regard to*1127 the effects of section 118 of the Revenue Act of 1936 (relating to "wash sales" of securities) and for the purpose of obtaining a loss deduction, we are of the opinion that the facts herein do not disclose an indirect sale from petitioner to her husband as fiduciary of the trust. It is apparent that the sales of the bonds were made to purchasers other than the trustee of the trust. The fact that petitioner's husband as trustee purchased the bonds from the open market shortly thereafter does not convert the sales by petitioner and the purchases by her husband as trustee into indirect sales between petitioner and her husband as trustee. Nor does the fact that the transactions were carried out with a view to obtaining a loss deduction and to avoid the effects of section 118 so color these transactions that sales to others may be termed indirect sales from petitioner to her husband as trustee.
*482 Respondent contends that, since petitioner's husband acted for petitioner under power of attorney and for the trust as its trustee, one directing mind controlled the sales and purchases of the bonds so that the sales must be considered to have been indirectly made between petitioner*1128 and her husband as trustee. He asserts that the presence of a preconceived plan to permit a loss deduction for petitioner and yet obtain the bonds for the trust, plus the fact that the sales and purchases were directed by petitioner's husband, indicates that the bonds were sold, indirectly, by petitioner to her husband as trustee for the trust. We can not agree. We find no authority in the law or the decided cases for the position taken by respondent. Nor do statements in Congressional Committee reports shed any light on the question.
Reviewed by the Board.
Decision will be entered under Rule 50.
STERNHAGEN, MELLOTT, ARNOLD, TYSON, and OPPER dissent.
Footnotes
1. SEC. 301. DISALLOWED DEDUCTIONS.
(a) Section 24(a) of the Revenue Act of 1936 is amended to read as follows:
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"(b) LOSSES FROM SALES OR EXCHANGES OF PROPERTY. -
"(1) LOSSES DISALLOWED. - In computing net income no deeduction shall in any case be allowed in respect of losses from sales or exchanges of property, directly or indirectly -
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"(F) Between a fiduciary of a trust and a beneficiary of such trust."
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