1938 BTA LEXIS 1039 | B.T.A. | 1938
Lead Opinion
In order for the petitioner to meet the requirements of the statute the loss must have actually been “sustained.” Section 23 (e) of the Revenue Act of 1932; Alfred, Hafner, 31 B. T. A. 338; Forbes v. Commissioner, 62 Fed. (2d) 571. This requires proof of disposition by sale or exchange, or of some “identifiable event” establishing worthlessness. Howard v. Commissioner, 56 Fed. (2d) 781; Commissioner v. R. J. Darnell, Inc., 60 Fed. (2d) 82; Commissioner v. Cleveland Trinidad Paving Co., 62 Fed. (2d) 85; Gowen v. Commissioner, 65 Fed. (2d) 923; certiorari denied, 290 U. S. 687. Proof of mere shrinkage in value will not suffice. Daniel J. Byan, 19 B. T. A. 52.
Petitioner argues that the common stock owned by him in the old company had no value on August 25, 1933, that under the plan of reorganization the common stock was wiped out and the only thing he received in place of the stock was an option to purchase an equivalent number of shares of the new corporation at $115 per share, and that said option is not “securities” within the intent or meaning of that word as used in section 112 (b) (3) of the Revenue Act of 1932.
We are satisfied that the transaction by which the petitioner surrendered his stock in the old company and received rights or options to purchase stock in the new company was a “reorganization” within the meaning of the statute. Counsel’s opening remarks at the hearing and the petitioner’s exhibits indicate that there was a statutory reorganization. The petitioner, however, argues that the provisions of section 112 (b) (3) are inapplicable because his option to purchase shares in the new corporation does not fall within the statutory term “securities.”
As was said by the court in Cortland Specialty Co. v. Commissioner, 60 Fed. (2d) 937; certiorari denied, 288 U. S. 599, “The word, ‘securities’ was used [in 203 (e)] so as not to defeat the exemption in cases where the interest of the transferor was carried over to the new corporation in some form.” The “form” in which this petitioner’s right “was carried over to the new corporation” was the right, unlimited as to time, to demand the issuance to him of 100 shares of stock of the new corporation at $115 a share, a right which we have already said yielded him $107 in the following year.
This case is distinguishable from Estate of C. T. Grant, 36 B. T. A. 1233, and the case of Union C. DeFord, 19 B. T. A. 339, as in each of those cases the old stock was found and determined to be worthless in the taxable year and the right to participate in the new corporation was found to be without value. Such is not the case here.
In addition to the foregoing considerations we are of the opinion that we would be forced to the same conclusion because of the prima facie presumption of correctness that attaches to the respondent’s determination. In order to overcome this presumption of correctness the petitioner must adduce evidence showing the worthlessness of his investment. Petitioner testified that he considered Ms investment
For the above and foregoing reasons we are of the opinion that the respondent’s determination must be approved.
Judgment will be entered for the respondent.
Sec. 112 (b) (3). * * * No gain or loss shall be recognized if stock or securities in a corporation a party to a reorganization are, in pursuance of the plan of reorganization, exchanged solely for stock or securities in such corporation or in another corporation a party to the reorganization.