Patterson v. Commissioner of Internal Revenue, 61.

• Decision Date: 12 May 1930
• Docket Number: No. 61.,61.
• Citation: 42 F.2d 148
• Parties: PATTERSON v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Second Circuit

42 F.2d 148 (1930)

PATTERSON v. COMMISSIONER OF INTERNAL REVENUE.

No. 61.

Circuit Court of Appeals, Second Circuit.

May 12, 1930.

Robert H. Montgomery, of New York City (Thomas G. Haight, of Jersey City, N. J., J. Marvin Haynes, of Washington, D. C., and Roswell Magill, of Chicago, Ill., of counsel), for petitioner.

G. A. Youngquist, Asst. Atty. Gen., and Sewall Key and Andrew D. Sharpe, Sp. Assts. to Atty. Gen. (C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and Dean P. Kimball, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., of counsel), for respondent.

Before L. HAND, CHASE, and MACK, Circuit Judges.

PER CURIAM.

The single question raised by the petition is the disallowance of a deficiency claimed by Patterson, the petitioner, arising from the sale of stock. In 1919 he sold for $1 two thousand shares of common stock in the International Mail Equipment Company, the shares being conceded at that time to be worthless. These he acquired in March, 1911, and asserts that at that time and two years later they had a value of $100; the ensuing loss he seeks to deduct from his income in 1919. The Commissioner fixed $16.36 as cost at acquisition and value on March 1, 1913, and calculated Patterson's loss accordingly. This the Board affirmed on the ground that there was no evidence showing the shares to have had a higher cost or value. The question is whether they should have found otherwise, and, unless the evidence admitted no alternative, we may not intervene. Bedell v. Commissioner of Internal Revenue, 30 F. (2d) 622 (C. C. A. 2); Andrews v. Com'r of Internal Revenue, 38 F.(2d) 55 (C. C. A. 2).

For some years before 1911, one Harris, with Lamar as a partner, had held the shares of a small Georgia company which owned some patents for a new sort of rural mail box. Lamar had died, and Harris was liquidating the firm; he met Patterson, who was on the outlook for promising ventures, and the two came to a bargain by which, for $20,000, Harris was to convey to Patterson the shares in the Georgia company together with other patents which the firm owned, and a contract with the Canadian government to supply 100,000 boxes at $3 apiece, which had for the most part been already performed. There was also some prospect of contracts with New Zealand and Australia and of added contracts with Canada.

Patterson in turn passed what he had so received to the International Mail Equipment Company in March, 1911. In exchange he got 10,000 shares of its common, and 370 shares of its preferred stock; 3,333 of the common shares were given to Harris, and 667 left in the treasury; 630 preferred shares were then sold for cash. Patterson was acting for Duke and Cunliffe-Owen, jointly with himself; these two being men of wealth and thought to be of consequence among financiers. Harris had apparently, though this rests upon inference, made the allotment of his shares a condition upon the trade. Patterson then divided 6,000 common shares between himself and the...