COMMISSIONER OF INTERNAL REVENUE v. Wright, 4436.
| Decision Date | 13 March 1931 |
| Docket Number | No. 4436.,4436. |
| Citation | 47 F.2d 871 |
| Parties | COMMISSIONER OF INTERNAL REVENUE v. WRIGHT. |
| Court | U.S. Court of Appeals — Seventh Circuit |
G. A. Youngquist, Asst. Atty. Gen., Sewall Key and Morton K. Rothchild, Sp. Assts. to Atty. Gen., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and De Witt M. Evans, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., for petitioner.
O. G. Maxwell, of Danville, Ill., for respondent.
Before ALSCHULER and SPARKS, Circuit Judges, and BALTZELL, District Judge.
Petitioner seeks review of a decision of the Board of Tax Appeals allowing the taxpayer a deduction from his federal income tax for the year 1922, which deduction petitioner had disallowed.
The facts found by the Board are, briefly, that in 1902 the taxpayer purchased 250 shares of corporate stock at par of $100, which on March 1, 1913, had a value of par; that the corporation encountered financial difficulties, and in 1922 the bankers who had been carrying it, and to whom it was largely indebted, refused longer to carry it and threatened bankruptcy proceedings unless each stockholder surrendered to the bankers 51 per cent. of his stock for the purpose of transferring it absolutely to a new manager of the corporation as compensation for his services in further conducting its business; that in the same year the taxpayer accordingly surrendered to the bank, and permanently parted with, the demanded part of his stock; that the corporate business was carried on until in 1924, at which time the corporation was wound up, paying its stockholders nothing. There was no evidence or finding as to the value of the stock at the time of its surrender.
Petitioner insists the loss occasioned by the surrender was not deductible from income for 1922; that the surrender represents additional cost to the stockholders of their remaining stock, the same as would payment of cash to the corporation by the stockholders, or their surrender to the corporation of part of their stock holdings; and that until all the taxpayer's stock was disposed of by the winding up of the corporation or otherwise, the loss could not be determined or deducted.
But this is not a case where, upon surrender of the stock, the stockholders retained the same proportionate interest in the corporation as they had held before, in which event loss to the stockholders would not accrue. The stock here in question was not surrendered to the corporation. It passed to...
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