Vaughan v. COMMISSIONER OF INTERNAL REVENUE, Docket No. 19601

• Decision Date: 27 September 1929
• Docket Number: Docket No. 19601,34193.
• Citation: 17 BTA 620
• Parties: B. ESTES VAUGHAN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
• Court: U.S. Board of Tax Appeals

17 B.T.A. 620 (1929)

B. ESTES VAUGHAN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket Nos. 19601, 34193.

Board of Tax Appeals.

Promulgated September 27, 1929.

R. A. Littleton, Esq., for the petitioner.

Paul L. Peyton, Esq., and J. C. Maddox, Esq., for the respondent.

Upon motion of the petitioner a rehearing was granted in this proceeding which is first reported in 15 B. T. A. 596. As a result, the Board makes the following additional findings of fact.

FINDINGS OF FACT.

The securities which the petitioner transferred to the First National Bank of Lexington were acquired subsequent to March 1, 1913, and cost petitioner $66,733.75. The difference between such cost and the cash value at which they were accepted by such bank was allowed by the Commissioner as a deductible loss in computing petitioner's taxable income for 1923.

The income and deductions of petitioner for 1923, as determined by the Commissioner, were as follows:

                Income
                    Salaries __________________________________________  $8,575.32
                    Interest __________________________________________   1,971.38
                    Dividends _________________________________________  18,222.17
                                                                        __________
                                                                         28,768.87
                Deductions
                    Loss on sale of securities _____________  $1,859.75
                    Interest paid __________________________   4,384.97
                    Taxes paid _____________________________   1,075.10
                    Contributions __________________________     470.00
                                                            ___________   7,789.82
                                                                        __________
                                                                         20,979.05
                

OPINION.

PHILLIPS:

The question for decision is whether petitioner sustained a loss in 1923 which he may deduct in computing his net income subject to tax. A substantial part of the facts appear in the previous report of this proceeding (15 B. T. A. 596). There is no question that the First National Bank of Lexington sustained a loss which it may deduct. Such a loss is not available to the individual stockholders. It may cause the value of their stock to fluctuate, but until the stock is sold or becomes worthless, a stockholder of a corporation sustains no loss which is deductible for tax purposes. Nor does the stockholder sustain any deductible loss when he is called upon to pay an assessment on his stock, even if such assessment be caused by losses of the corporation. W. R. Ranney, 16 B. T. A. 1399, and cases there cited. Such assessment is recognized as a part of the cost of such stock to be treated as any other cost. See Henry Adamson, 17 B. T. A. 17.

The petitioner does not claim as a deduction the amount of the assessment which was levied and paid upon his stock under the double...