*1 §74 that COM- Appeals v. Board of Tax erred in & CO.
JOSEPH EICHELBERGER REV- OF INTERNAL $29,000 land MISSIONER a loss of in the sale of certain ENUE. tax was realized in 1930 and not No. undisputed facts are 1932. The- 1930 con- $35,000 in" the land cost and was Fifth Circuit $6,000 veyed for to Umatilla March corporations paid. be later Both longed wholly and officers to two individuals who were the return Taxpayer tax each. its income deduction for the 1930 claimed as a $29,000 transac- a loss realized the as Groves, The Inc. Com- tion with Umatilla missioner, stipulated, is disallowed as it deduction, Board it was and the finds that “for reason as pe- since stock of charge Groves, and titioner the trans- same individuals all fer was non-taxable transaction.” ruling contested. Umatilla paid nothing, sale of the had and canceled, ap- and agreed to be land the books propriated were made on entries reconveyance corporations but no both executed. In 1932 Umatilla Groves, Inc., conveyed the a stran- land to $6,000 form of took the ger for which stock in third HUTCHESON, Judge, dissent- Circuit turned over to once ing. $6,000 These it sold cash. and up in 1932 were set transactions realizing tax a loss return again deduction was year of but disallowed. $35,- which cost The land gone, has and the Beyond question the loss show for it. suffered, has and question is it occurred or whether we 1932. Under all the circumstances to be allowed deduction is no room for doubt 1932. There Duncan, Tavares, Fla., pe- E.C. identically one of sale in
titioner. managed corporations the other on and Keller, Jones, Norman D. Joseph M. paid nothing was ever was fictitious Sp. Atty. Gen., Key, Assts. and Sewall only to realize a loss. Trans and intended Morris, W. H. Robert James Jackson corporations owning between each actions Gen., ttys. Oliphant, A Herman Asst. identically tax other or Treasury, Counsel, Department Gen. very ignored realizing generally statutes Marshall, Sp. Atty., E. Bureau of In- John ternal provision no While gain loss. Revenue, C., Washington, both of. D. pointed to, disallow fitting this respondent. the loss by the Commissioner of ance FOSTER, SIBLEY, Before reason for the Judges. Circuit accepted as and was reasonable seemed sale having The fictitious right decision. SIBLEY, Judge. object, was set aside of its failed corporations. Thereafter taxpayer, of both petitioning Joseph Eichel- books The collected the Co., corporation, never have berger & asserts *2 875 Although petitioner’s individuals who stock. owned wholly executory consideration. Groves, As consideration Umatilla transfer legal title left in Umatilla was gave petitioner $4,- promissory note for its ownership was beneficial existing mortgage 000 and Groves, Inc., assumed an held the taxpayer. Umatilla $2,000. obligations of Neither these of for the benefit naked trustee a paid by such were ever In its Umatilla. taxpayer. land in 1932 When it sold the petitioner sought income tax return for 1930 outsider, corporate officers to an since the to claim the deduction of loss of was were the of course same the sale, on of account this but it was advised consenting. turning In consideration by Groves, Inc., over to the Umatilla Jacksonville petitioner since the stock of land, and of Umatilla paying debt for the its wholly by individuals, was exist, the same obligation but was cause that did not purposes “no loss for tax could be taken recognizing trust. The consideration property until the had been to an sold out- if had been must have turned over it side interest.” After this was $6,000. advice which twice first real sale was the 1931, given entry made on the of the land. of books purporting to by This conclusion is fortified property transfer the Nothing, back. how- rejection of the claim loss in 1930 on ever, this, was done to effectuate and in ground that the then sale was not a real purpose 1932 for taking property one and could not realize loss. Whether which was to be in trade for the right wrong, that decision was the ac property question, petitioner organized a credited officer the United States made company, Clermont the stock justly it. He cannot decide in 1930 that by persons, was held the same thereby the sale did realize the loss and and in the same as the stock of taxes, collect increased and in 1932 decide petitioner, and of Umatilla. The trade was that it did realize the loss and collect taxes accomplished by having Umatilla deed the accordingly again. We said Perkins et property purchaser, to the having Clermont Thomas, Collector, F.(2d) al. v. 956: issue its to stock Umatilla the basis of manifestly unjust gov to “It allow the $6,000, having assign Umatilla the stock ernment, having taxpay thus informed the petitioner. In to the same its stock- er he could not have the deduction for his purchased holders petition- stock from capital say invested now he to upon er for and it is this sale of have it then.” This is not a case of a the stock that the loss of is claimed. neglected rights who to assert his The Commissioner the Board concluded lost them It so limitation. is not a occurred loss in 1930 when the taking bad advice a mere property was deeded to Umatilla and not agent Darling revenue as in v. Commission in 1932 when the stock sale occurred. I (C.C.A.) right er 111. The they right. The fact that claimed in the 1930 return and disallowed stock and of Umatilla was by the Commissioner. The United States persons the same in no manner got the benefit of his decision then and prevents the sale made in 1930 from being ought to abide it judgment now. The effective establish the loss as of that time. reversed, with direction to correct the tax The fact revenue advised by allowing deduction in contention. that because of the ownership stock there Reversed. no taxable transaction is not material determining whether or not there was. Judge (dissent- Neither is the fact that the notes were not ing). paid by Umatilla or that entries were made agree majority following year I cannot with the in its books with the effecting the deduction was intention of because not allowed when transfer back. No property 1930 it be transfer occurred. The claimed in must allowed when remained in 1932. The facts in its name and sold claimed are without it. The consid- they eration, dispute. though assigned simple petitioner, The issue is a purchased Petitioner in 1925 one. real received at the value es- $35,000. it tate Orlando In 1930 the notes executed and assumed. property by this deed transferred Under these circumstances to Umatil- disregard deny company, verity la whose except created, corporate for certain shares structure it was all in or- proportion loss in two der to claim a different from occurred, would that in it in fact system which into a to introduce confusion must function yearly basis constructed on a taxation, mem- regards on such As basis. *3 corporation it- corporation and a bers of a essentially The whole different. self System Taxing Federal structure com- recognition exact of and based on a pliance Cot- Planters’ this difference. with Hopkins (C.C.A.) ton Oil v.Co. the Board 826. The Commissioner tax- refusing to right in loss in a payer claim a fact that did occur. The erroneously given discouraged advice pressing deduction claim from his no contract with created to final decision by agreement either the Government to in estoppel deductions for 1930could taken been taken have I think order any year. the Board’s other right, I dissent from reversal. MOTORS CORPORATION v. GENERAL (two cases). CO. SWAN CARBURETOR CO. v. MOTORS SAME.
REEKE-NASH 6933, 7108, 7102. Nos. Sixth Jan. April 14,
As Amended