Sweet v. Commissioner of Internal Revenue
Citation | 102 F.2d 103 |
Decision Date | 02 March 1939 |
Docket Number | No. 3405.,3405. |
Parties | SWEET et al. v. COMMISSIONER OF INTERNAL REVENUE. |
Court | United States Courts of Appeals. United States Court of Appeals (1st Circuit) |
Bartlett Harwood and Alexander Lincoln, both of Boston, Mass. (Herrick, Smith, Donald & Farley, of Boston, Mass., on the brief), for Sweet et al.
Warren F. Wattles, Sp. Asst. to Atty. Gen. (James W. Morris, Asst. Atty. Gen., and Sewall Key, Sp. Asst. to Atty. Gen., on the brief), for Commissioner.
Before BINGHAM and WILSON, Circuit Judges, and SWEENEY, District Judge.
This is a petition to review an order or decision of the Board of Tax Appeals of January 30, 1938, determining a deficiency tax for the year 1933 of $7,016.09 in the income tax of Alfred J. Sweet and Maude Webster Sweet, the petitioners before the Board at the time it entered its decision. Since then Mr. Sweet has died and his executor, Lyman H. Allen, has been substituted in his place.
Prior to the death of Mr. Sweet he and Maude Webster Sweet were husband and wife, citizens of the United States, residing, in the year 1933 and for some time thereafter, in Maine, where they filed a joint return of income for that year. Each of the spouses was engaged in the trade or business of buying and selling securities or commodities for his or her own account. The wife realized gains upon the sale or exchange of noncapital assets (i. e., securities held for less than two years) during the taxable year and sustained losses on like sales or exchanges. Her losses ($262,802.82) exceeded her gains ($126,191.60) upon such transactions by $136,611.22. The husband realized gains ($207,367.62) and sustained losses ($60,977.92) upon such transactions, his gains therefrom exceeding his losses by $146,389.70.
In their joint return of income the spouses deducted the excess of the wife's losses ($136,611.22) over her gains in such transactions from the gains of the husband ($146,389.70) over his losses ($60,977.92) arising out of like transactions. In auditing the return the Commissioner ruled that under Section 23(r) of the Revenue Act of 1932, 26 U.S.C.A. § 23 note, the noncapital losses of the wife in the sum of $136,611.22 upon such sales and exchanges by her were not deductible in the joint return from the net noncapital gains of her husband ($146,389.70) upon like sales and exchanges, so that a deficiency of $70,816.09 in the tax on the joint return resulted and was assessed.
The petitioners do not question the correctness of the deficiency ($70,816.09), provided the rejection of the wife's net noncapital loss ($136,611.22), as a deduction, was correct.
The sections of Chapter 209 of the Revenue Act of 1932, here involved, are as follows:
"(8) `Capital assets' means property held by the taxpayer for more than two years (whether or not connected with his trade or business), but does not include stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale in the course of his trade or business. * * *" 26 U.S.C.A. §§ 23(e) (2), (r) (1) note, 51(b) (2), 101(c) (8) note.
Treasury Regulations 77, promulgated under the Revenue Act of 1932, so far as here material read:
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