Griffin v. COMMISSIONER OF INTERNAL REVENUE, Docket No. 11546.

• Decision Date: 22 August 1927
• Docket Number: Docket No. 11546.
• Citation: 7 BTA 1094
• Parties: P. P. GRIFFIN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
• Court: U.S. Board of Tax Appeals

7 B.T.A. 1094 (1927)

P. P. GRIFFIN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 11546.

Board of Tax Appeals.

Promulgated August 22, 1927.

George W. Zeigler, Esq., for the petitioner.

W. H. Lawder, Esq., for the respondent.

This proceeding results from the determination by the respondent of deficiencies in income tax for the calendar years 1920 and 1921, in the amount of $7,989.10. Two errors are assigned: (1) The respondent erred in his failure to allow losses sustained in the year 1920, resulting from the sale of stock; (2) respondent erred in his failure to allow a deduction for interest paid in the year 1921.

FINDINGS OF FACT.

Petitioner resides at Lock Haven, Pa., where he is engaged in the lumber business. Subsequent to March 1, 1913, he acquired 610 shares of the capital stock of the Bee Tree Lumber Co., a West Virginia corporation, paying cash therefor in the amount of $61,000. Between the date of acquiring the stock and the year 1920, the Bee Tree Lumber Co. was not prosperous and became involved financially. Petitioner's attorney advised him to sell a part of his stock in the year 1920, in order that his books of account would not show as appearing thereon an asset of questionable value, and also that he might derive the benefit of the sale in being able to claim a deduction for the loss in his income-tax return for the year 1920. Petitioner sold the 610 shares of stock of the Bee Tree Lumber Co. to his brother and secretary in the month of November, 1920, for the sum of $6,100. No agreement or understanding existed between petitioner and the purchasers of the stock, concerning the repurchase of the same. Checks in payment of the stock in amounts of $6,100 were received by petitioner in the year 1920. During the year 1921 petitioner repurchased the stock.

Petitioner acquired, prior to 1920, shares of stock in the Basic Refractories Co. located at Natural Bridge, N. Y. He owned, in the year 1920, between 68 and 78 shares of the par value of $100 per share, and in the year 1920 or 1921, sold the same, either to his brother or secretary, for $10 per share.

During the year 1920 and 1921, the Bee Tree Lumber Co. was in need of additional funds with which to carry on its business, and petitioner agreed to endorse the promissory notes of the corporation to enable it to secure the desired funds. In either the year 1920 or 1921, petitioner paid interest due on the promissory notes of the corporation, in the amount...