Citizens & Southern Nat. Bank v. United States, 42829.
| Citation | 14 F. Supp. 915 |
| Decision Date | 01 June 1936 |
| Docket Number | No. 42829.,42829. |
| Parties | CITIZENS & SOUTHERN NAT. BANK et al. v. UNITED STATES. |
| Court | U.S. Claims Court |
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Daniel J. Gantt, of Atlanta, Ga., for plaintiffs.
Josheph H. Sheppard, of Washington, D. C., and James W. Morris, Atty. Gen., for the United States.
Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.
This is a suit for the recovery of income tax for 1931. The one question involved is whether plaintiffs are entitled to a deduction on account of losses sustained by their decedent in gambling transactions in France at places where gambling was carried on legally. The applicable statute, section 23 (e), Revenue Act of 1928, 26 U.S.C.A. § 23 note, provides for the allowance of deductions for losses, if not compensated by insurance or otherwise: (1) If incurred in trade or business; or (2) if incurred in any transaction entered into for profit, though not connected with the trade or business.
Admittedly, the decedent was not engaged in gambling as a trade or business, and the losses were not compensated by insurance or otherwise. The deduction is accordingly allowable, if at all, by virtue of the second proviso which permits the allowance of the deduction if the transactions were entered into for profit even though not connected with his trade or business. The parties agree that the loss claimed was sustained, except to a possible negligible amount, and therefore the sole question remaining is whether the transactions were entered into for profit; a question of fact.
We have found adversely to plaintiffs on the factual question. We are satisfied the record fully justifies a finding that the transactions were not entered into for profit. The decedent was an individual who had inherited a great fortune and who had never earned any money, except for a short time when he was in the Navy during the World War. While testifying in 1935, he could not give an accurate statement of his net worth though he estimated that it was approximately $2,500,000. His income for 1931 (approximately $250,000) was derived from dividends on inherited property, and while he was nominally the head of one of the corporations in which he held stock he gave little time to the direction of its affairs or the affairs of any other property in which he was interested. He could not give the name of a Parisian corporation in which he had invested a considerable sum, although it had only gone out of business in 1931.
From 1921 to 1935, the decedent spent most of his time in Europe with headquarters in Paris where he led a life of leisure and as a so-called "sportsman." During these fourteen years he visited Cannes, Deauville, and other pleasure resorts spending approximately six weeks in each regular season at each of the two places mentioned. He was not a professional gambler, but, while at the various places where gambling was permitted, he indulged in that alluring pastime, particularly at Cannes and Deauville, where he played chemin de fer. His testimony is that he played that game at those places for six or seven years prior to 1931, but that he was never a winner when he left a casino. We understand from the latter statement that he did win at times, but that the net result of play at all times was a loss. The losses in those...
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