Ruml v. Commissioner of Internal Revenue, 49.
| Decision Date | 06 April 1936 |
| Docket Number | No. 49.,49. |
| Parties | RUML v. COMMISSIONER OF INTERNAL REVENUE. |
| Court | U.S. Court of Appeals — Second Circuit |
Louis Mead Treadwell, of New York City, for petitioner.
Frank J. Wideman, Asst. Atty. Gen., and Norman D. Keller and Howard P. Locke, Sp. Assts. to Atty. Gen., for respondent.
Before MANTON, SWAN, and CHASE, Circuit Judges.
The Commissioner refused to allow a deduction claimed by the petitioner in 1928 for a loss on the sale of stock. That created the deficiency. Neither the fact that a deductible loss was sustained nor its amount was disputed. The sole issue is whether the loss was deductible in 1928 as claimed by the petitioner or in 1929 as the Commissioner insisted and the Board of Tax Appeals decided.
In December, 1928, the petitioner owned 4,000 shares of the capital stock of North Central Texas Oil Company which he had purchased in that year, and which were deposited with the Guaranty Trust Company as collateral for a loan. He desired to sell that stock at the then market, and instructed his broker to do so, advising him how the shares were held as collateral, and telling him that there might be some delay in making delivery. His broker informed him that the stock would be sold, and that petitioner might make delivery to the broker at his convenience when he paid off the loan or substituted other collateral to release the shares.
The broker sold 4,000 shares of such stock in December, and credited the petitioner's account with the proceeds, which were less than what the petitioner had paid for the shares he owned. Petitioner obtained from the trust company 1,500 of his shares, and delivered them to the broker in December, 1928. That part of this loss sustained on the sale of those shares has been allowed as a deduction. In February, 1929, the petitioner paid the trust company loan, obtained the remaining 2,500 shares, and delivered them to the broker. The loss attributable to the sale of those shares was not allowed in 1928 on the ground that it was not sustained until 1929.
On January 1, 1929, the petitioner received a statement from the broker indicating that he was being carried short 2,500 shares of the stock, and upon inquiring what that meant, was told, "That is simply the way we carry it until you deliver it." The petitioner neither intended to make what is known as a short sale nor instructed his broker to do so, though he did direct his broker to sell the shares, leaving the broker free to make the sale as he might.
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