Scoville v. COMMISSIONER OF INTERNAL REVENUE, Docket No. 24457-24459
| Decision Date | 19 November 1929 |
| Docket Number | 24461.,Docket No. 24457-24459 |
| Parties | EDITH SCOVILLE, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. LOIS CHURCH WARNER, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. GRACE SCOVILLE, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. MARY F. McCHESNEY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Board of Tax Appeals |
Courtland Kelsey, Esq., for the petitioners.
Eugene Meacham, Esq., for the respondent.
These proceedings, which present substantially identical issues of fact and law, were consolidated upon petitioners' motion at the hearing. The respondent determined deficiencies in income tax for 1922 as follows:
Edith Scoville _______________________________ $7,037.18
Lois Church Warner ___________________________ 7,692.36
Grace Scoville _______________________________ 2,459.72
Mary F. McChesney ____________________________ 9,176.55
The question presented is whether petitioners sustained deductible losses of stock, representing one-half petitioners' holdings which were surrendered to procure financial aid for the issuing corporation.
FINDING OF FACT.
The petitioners are individuals with address at 250 Park Avenue, New York City.
On February 2, 1903, petitioner Edith Scoville acquired fifty 5 per cent bonds of the Barnum Richardson Co. at a cost of $50,416.66; on February 19, 1917, she purchased at par twenty-five 6 per cent bonds of said company at a cost of $25,000. Interest on these bonds was paid from the dates of purchase until July, 1918. In 1920 and 1921 all the bonds were exchanged for 5,513 shares of the preferred stock of the Salisbury Iron Corporation. The par value of this stock was $10 a share.
On February 19, 1917, petitioner Lois Church Warner acquired at par 6 per cent bonds of said company of the value of $25,000, and on April 24, 1917, additional 6 per cent bonds of the value of $50,000, all of which she exchanged during 1920 and 1921 for 3,750 shares of the preferred stock of the Salisbury Iron Corporation.
On July 15, 1898, petitioner Grace Scoville acquired at par 6 per cent bonds of the aforesaid company of the value of $25,000. A later assessment of $275 for reorganization expenses raised the debit against these bonds to $25,275. Petitioner received interest on them until June, 1918. In 1920 she exchanged them for 2,000 shares of the preferred stock of the Salisbury Iron Corporation.
On May 7, 1904, petitioner Mary F. McChesney purchased at par fifteen 5 per cent bonds of the aforesaid company of the value of $15,000, and on February 19 and April 24, 1917, purchased at par 6 per cent bonds of the respective values of $25,000 and $34,000. Upon these bonds she received interest until June, 1918. During 1920 and 1921 they were exchanged for 4,358 shares of the preferred stock of the Salisbury Iron Corporation.
Petitioners Mary F. McChesney and Edith Scoville each purchased 2,600 shares of the preferred stock of the Barnum Richardson Co., paying therefor $25 a share.
The Barnum Richardson Co. was a closely held family corporation, dating back to the Revolution. It was engaged in the operation of a car wheel foundry and a general casting foundry at Lime Rock, Conn.; it also operated two blast furnaces for local ores with charcoal until the cost of this fuel made it impractical. The company then, through an affiliated firm, built a wood chemical plant near the furnaces a few years prior to the World War. Shortly after the entrance of the United States into the war, the demand for wood and the price regulation of products by the Government caused economic difficulties. Prior to 1917 the company had consistently enjoyed a fair average of prosperity and nothing had happened to impair the value of its bonds.
In 1919 the Salisbury Iron Corporation was organized to take over the business of the Barnum Richardson Co., and preferred stock of the Salisbury Co. was exchanged for bonds of the Barnum Co. In September, 1922, each of the petitioners surrendered one-half of the number of shares of preferred stock which she had thus acquired in exchange for the bonds. According to an entry in petitioner Grace Scoville's ledger, this surrender was made "to the company to be contributed by it to the company's...
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