Community Bond & Mortgage Corp. v. Commissioner ( 1932 )

OPINION.

Marquette :

The petitioner rests its case upon the proposition that the $30,000 paid for the capital stock of Burns & Steta, Inc., is deductible either as an ordinary and necessary business expense, or as a loss. The respondent contends that the payment was a capital expenditure and not deductible.

The capital stock of Burns & Steta, Inc., had no value after it was purchased by the petitioner. There were no assets back of it, and, forthwith, the issuing corporation was dissolved. The preliminary certificate of dissolution was filed in December, 1926, and, in our opinion, the stock became worthless at that time, even though the final formalities of dissolution were not completed until 1927.

We conclude, therefore, that the cost of the stock in question resulted in a deductible loss for the year 1926. Any consequential net loss should be allowed as a deduction in computing the petitioner’s net income for the succeeding taxable year.

Decision will be entered wider Bule 50.