DocketNumber： Docket No. 34364.
Judges： Black
Filed Date： 12/31/1929
Status： Precedential
Modified Date： 11/2/2024
*2011 Where petitioner and his father speculated in stocks on joint account, resulting in a loss to petitioner of $24,794.25, such loss is deductible.
*597 Petitioner seeks redetermination of a deficiency of $3,301.55 for the year 1923 and as ground therefor alleges that the respondent erred in not allowing as a deduction from gross income certain losses amounting to $24,794.45 sustained in stock speculations in a joint account with his father, Julius Marqusee, during said year.
FINDINGS OF FACT.
Petitioner is an individual with his place of business at 141 Water Street, New York City, N.Y.
For several years prior to 1921 petitioner and his father, Julius Marqusee, were engaged in the tobacco business in the form of a partnership. In 1921 the business was incorporated and the capital *598 stock was divided between them, each holding one-half of the common stock, but the father of petitioner held most of the preferred stock. Petitioner's father was president of the corporation and gave his attention principally to the selling end of the business, *2012 while petitioner looked after the financial end and the company's relations with banks, brokers and agents.
Prior to the formation of the corporation and continuing through the taxable year, petitioner's father had been operating in Wall Street on his own account, and had sustained heavy losses. In 1920, 1921, and 1922, the losses were in the respective amounts of $212,316.61, $64,168.92, and $102,030.83. Fearing that his father would overextend himself in such outside operations and thereby injure the credit and standing of their business enterprise, and in addition lose his personal fortune, petitioner proposed to take a one-fifth interest therein for the purpose of exercising a restraining influence over him and thus avoiding, if possible, such heavy losses.
Petitioner discussed the matter with his father about the first of 1923, and it was agreed that for the year 1923 the speculation account should be carried on as a joint account between petitioner and his father. Petitioner was to have a one-fifth interest and was to contribute $30,000 to the joint operations and on January 15, 1923, entries were made on the books of the corporation transferring $30,000 from the account*2013 of petitioner to that of his father. The entry on the journal is as follows: "Jack Marqusee to Julius Marqusee, loan from former to latter, $30,000.00." The words "loan from former to latter" were added by the accountant making the entry and without any suggestion or order from either petitioner or his father.
The transfer was not a loan from petitioner to his father, but was petitioner's contribution to the capital of the joint venture for 1923.
The joint operations for 1923 resulted in a loss of $123,972.24, of which petitioner's one-fifth amounted to $24,794.45, which is now claimed as a deductible loss from gross income for 1923.
Several years later the father repaid petitioner the difference between the $30,000 contribution and the loss of $24,794.45, amounting to $5,205.55, together with some other debts, but the amount of the loss was never repaid.
Petitioner and his father each received from the corporation $40,000 per year as compensation, usually drawing $833.33 monthly until the end of the year, when the balance of $30,000 would be paid or credited each of them.
At the time of the transfer of the $30,000 from petitioner's account to his father, petitioner's*2014 credit amounted to $30,633.57.
Respondent declined to allow the deduction on the ground that it was a loan or a gift.
*599 OPINION.
BLACK: The question for decision is purely one of fact, viz., whether petitioner loaned or made a gift to his father of $30,000, or embarked in a joint venture with his father and contributed that amount to the joint enterprise. There is no doubt that one-fifth of the loss in the stock operations in the taxable year was $24,794.45.
There is no evidence of a gift and the only evidence of a loan is the entry on the journal, which was made by an accountant of his own volition and without any orders from either of the parties interested. On the other hand, the evidence is ample to the effect that the petitioner and his father embarked in a joint venture for the year 1923 with interests in the proportion of one to five, that petitioner contributed $30,000 thereto and sustained a loss of $24,794.45. Petitioner is entitled to a deduction of $24,794.45 from gross income for 1923.