Gordon v. Commissioner

Appeal of CHARLES A. GORDON.

Gordon v. Commissioner

Docket No. 1728.

United States Board of Tax Appeals

1 B.T.A. 1223; 1925 BTA LEXIS 2620;

May 23, 1925, decided Submitted April 6, 1925.

---

Albert I. Coe, C.P.A., for the taxpayer.

Robert A. Littleton, Esq., for the Commissioner.

---

Before IVINS, MARQUETTE, and MORRIS.

This appeal is from a deficiency in income tax for the year 1919 in the sum of $4,015.21. The deficiency arose from the refusal of the Commissioner to allow the taxpayer a deduction for an alleged loss sustained on an exchange of stock in a corporate reorganization. The case was submitted on the pleadings, from which the Board makes the following

FINDINGS OF FACT

1. The taxpayer is a citizen of the United States, residing in New York City. At various times during the years 1911-1915, inclusive, he purchased and owned 385 shares of stock in Perry Dame & Co., for which he paid the par value of $100 a share, or a total of $38,500. During this time the corporation was capitalized at $625,000.

2. In December, 1919, the said corporation reorganized to secure new capital. The capital stock of the reorganized company was $975,000, made up to $350,000 preferred stock (3,500 shares, $100 par value each) and $625,000 common stock (12,500 shares, $50 par value each). The stockholders of the old company received 25 per cent of the new common stock and the remaining 75 per cent of the new common stock was distributed as a bonus to the purchasers of the preferred stock.

3. The taxpayer for his 385 shares of the old company received 171 shares of common stock of the reorganized company of a par value of $50, or $8,550. The taxpayer claims that the actual value of his stock was $45 per share, so that in the exchange he received a value of but $7,695, thereby sustaining a loss of $30,805. The Commissioner refused to allow such loss under the provisions of section 202(b) of the Revenue Act of 1918, and in a deficiency letter mailed November 29, 1924, assessed a deficiency against the taxpayer in the sum of $4,015.21.

DECISION.

The determination of the Commissioner is approved.