OPINION
Katjm, Judge:
1. We have found as a fact that Malden’s “purchase” and “resale” of the 3,000 shares of Railway stock were merely component parts of a sham. Although there was testimony calculated to lead us to the conclusion that Malden made a bona fide purchase of such shares, we did not believe it. We heard and observed both Feuerstein and Keizer, and the short answer to petitioner’s position is that we had no confidence in their testimony in this respect.
It must be remembered that Malden’s “purchase” and “resale” of 3,000 shares of Eailway stock were parts of a larger picture involving four other clients of Glunts who entered into like transactions. All five of these clients, including Malden, purported to purchase an aggregate of 20,370 shares of Eailway stock on February 14, 1955, from Keizer & Co. at the identical price of 52, and all five purported to resell their respective shares to Keizer & Co. at the identical price of 46% on the very next day when the stock went ex dividend. The 20,370 shares which Keizer & Co. purported to sell to these five clients of Glunts on February 14 were substantially in excess of the total number of shares of that stock that were traded on that day on the New York Stock Exchange, and Keizer & Co. had no such stock in its inventory.2 We do not believe that Keizer & Co. ever intended to make delivery of the shares it purported to sell, or that it contemplated anything other than a bookkeeping reversal of these sales by means of purported repurchases when the stock went ex dividend. The fact that all five of Glunts’ clients, including Malden, promptly “resold” their shares to Keizer & Co. speaks too loudly to be ignored in the context of the record before us.3 We are satisfied that Malden did not make any bona fide purchase of Eailway stock on February 14, that it did not sell any Eailway stock on February 15, that it suffered no short-term capital loss on the transaction, that it received no dividend in connection with that transaction entitling it to a deduction in the amount of 85 percent thereof, and that indeed no part of any such alleged dividend should have been included in its gross income in the first instance.
The situation before us is somewhat comparable to Empire Press, Inc., 35 T.C. 136, which involved another variation of Glunts’ basic device and which was similarly executed for the taxpayer therein by Keizer & Co. The result that we reach here is in accord with what we recently referred to in J. George Gold, 41 T.C. 419, 427, and Sammy Gahn, 41 T.C. 858, 874, as “an ever lengthening line of decisions reaching like results in a variety of situations comparable to the one before us.” Eli D. Goodstein, 30 T.C. 1178, affirmed 267 F. 2d 127 (C.A. 1); Broome v. United States, 170 F. Supp. 613 (Ct. Cl.); Sonnabend v. Commissioner, 267 F. 2d 319 (C.A. 1), affirming per curiam a Memorandum Opinion of this Court; Lynch v. Commissioner, 273 F. 2d 867 (C.A. 2), affirming 31 T.C. 990 and Leslie Julian, 31 T.C. 998; Egbert J. Miles, 31 T.C. 1001; Jookmus v. United States, 335 F. 2d 23 (C.A. 2) ; Becker v. Commissioner, 227 F. 2d 146 (C.A. 2), affirming a Memorandum Opinion of this Court; Gheen v. Commissioner, 331 F. 2d 470 (C.A. 6); Rubin v. United States, 304 F. 2d 766 (C.A.7); Lewis v. Commissioner, 328 F. 2d 634 (C.A. 7), affirming a Memorandum Opinion of this Court; Morris R. DeWoskin, 35 T.C. 356, appeal dismissed (C.A. 7); Perry A. Nichols, 37 T.C. 772, affirmed 314 F. 2d 337 (C.A. 5); MacRae v. Commissioner, 294 F. 2d 56 (C.A. 9), affirming in part and remanding in part 34 T.C. 20, certiorari denied 368 U.S. 955; Kaye v. Commissioner, 287 F. 2d 40 (C.A. 9), affirming per curiam 33 T.C. 511; Milton Hart, 41 T.C. 131; Carl Shapiro, 40 T.C. 34; cf. Knetsch v. United States, 364 U.S. 361; Amor F. Pierce, 37 T.C. 1039, affirmed 311 F. 2d 894 (C.A. 9); A. A. Helwig, 37 T.C. 1046; United States v. Roderick, 290 F. 2d 823 (C.A. 5); Bridges v. Commissioner, 325 F. 2d 180 (C.A. 4), affirming 39 T.C. 1064; Weller v. Commissioner, 270 F. 2d 294 (C.A. 3), affirming 31 T.C. 33 and W. Stuart Emmons, 31 T.C. 26, certiorari denied 364 U.S. 908; William R. Lovett, 37 T.C. 317.
Petitioner’s “purchase” and “resale” of 3,000 phantom shares of Railway stock consisted in substance of nothing more than a bucket-shop-type transaction.4 Although it argues earnestly that, whatever may have been. Keizer’s intentions, Feuerstein intended to make a bona fide purchase in its behalf, we do not take so generous a view of Feuerstein’s intentions. We think that he fully understood that he was entering into a transaction that was to be promptly reversed without any delivery of securities. Moreover, even if his testimony were to be accepted at face, a taxpayer’s possible good faith cannot change the nature of what is otherwise a sham transaction. See Bornstein v. Commissioner, 334 F. 2d 779 (C.A. 1), affirming a Memorandum Opinion of this Court; Jockmus v. United States, supra; Lynch v. Commissioner, 273 F. 2d 867, 872 (C.A. 2); Gheen v. Commissioner, supra; Perry A. Nichols, 37 T.C. 772, 788-789, affirmed 314 F. 2d 337, 338 (C.A. 5); MacRae v. Commissioner, 294 F. 2d 56, 59 (C.A. 9), certiorari denied 368 U.S. 955. Cf. Sammy Cahn, 41 T.C. 858, 875, fn. 4.
We do not express any opinion as to whether petitioner would have become entitled to the tax benefits it seeks if it had actually purchased Railway stock dividend on and then sold it ex dividend, all in accord with a preexisting plan.5 We cannot find on the record before us that it ever purchased any Railway stock, or that Keizer & Co. ever made a bona fide short sale of such stock to petitioner.6 It is one thing to make a genuine short sale, intending to effect delivery thereafter; it is quite another thing to go through the form of executing a short sale without intending to make delivery. The burden of proof was upon the petitioner, and the testimony offered by it to carry that burden did not ring true.
2. Petitioner contends alternatively that if the first issue should be decided against it, as was done above, it is nevertheless entitled to deduct its “out-of-pocket expenses” in the amount of $2,805. Actually, petitioner did not make any specific expenditure in that amount. That figure reflects its net loss on the transaction and represents the difference between the $93,600 which petitioner paid Keizer & Co. as part of the purported purchase price for the 3,000 shares of Kailway stock and the sum of the two amounts which it received from Keizer & Co., namely, $75,795 as the balance in its account upon the alleged resale of those shares and $15,000 as a “dividend” thereon.
Petitioner seeks the $2,805 deduction on either of two grounds: (i) As a short-term capital loss upon the sale of an “option” under sections 1234(a) 7 and 165 8 of the 1954 Code, or (ii) as an “ordinary and necessary” business expense under section 162 (a) .9 We hold that the claimed deduction is not allowable under any of those provisions.
(i) Petitioner argues that it could have demanded delivery from Keizer & Co. of 3,000 shares of Kailway stock “upon payment of $62,400, the ‘exercise price,’ ” that on February 15, 1955, it “sold the option to Keizer & Co.
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OPINION
Katjm, Judge:
1. We have found as a fact that Malden’s “purchase” and “resale” of the 3,000 shares of Railway stock were merely component parts of a sham. Although there was testimony calculated to lead us to the conclusion that Malden made a bona fide purchase of such shares, we did not believe it. We heard and observed both Feuerstein and Keizer, and the short answer to petitioner’s position is that we had no confidence in their testimony in this respect.
It must be remembered that Malden’s “purchase” and “resale” of 3,000 shares of Eailway stock were parts of a larger picture involving four other clients of Glunts who entered into like transactions. All five of these clients, including Malden, purported to purchase an aggregate of 20,370 shares of Eailway stock on February 14, 1955, from Keizer & Co. at the identical price of 52, and all five purported to resell their respective shares to Keizer & Co. at the identical price of 46% on the very next day when the stock went ex dividend. The 20,370 shares which Keizer & Co. purported to sell to these five clients of Glunts on February 14 were substantially in excess of the total number of shares of that stock that were traded on that day on the New York Stock Exchange, and Keizer & Co. had no such stock in its inventory.2 We do not believe that Keizer & Co. ever intended to make delivery of the shares it purported to sell, or that it contemplated anything other than a bookkeeping reversal of these sales by means of purported repurchases when the stock went ex dividend. The fact that all five of Glunts’ clients, including Malden, promptly “resold” their shares to Keizer & Co. speaks too loudly to be ignored in the context of the record before us.3 We are satisfied that Malden did not make any bona fide purchase of Eailway stock on February 14, that it did not sell any Eailway stock on February 15, that it suffered no short-term capital loss on the transaction, that it received no dividend in connection with that transaction entitling it to a deduction in the amount of 85 percent thereof, and that indeed no part of any such alleged dividend should have been included in its gross income in the first instance.
The situation before us is somewhat comparable to Empire Press, Inc., 35 T.C. 136, which involved another variation of Glunts’ basic device and which was similarly executed for the taxpayer therein by Keizer & Co. The result that we reach here is in accord with what we recently referred to in J. George Gold, 41 T.C. 419, 427, and Sammy Gahn, 41 T.C. 858, 874, as “an ever lengthening line of decisions reaching like results in a variety of situations comparable to the one before us.” Eli D. Goodstein, 30 T.C. 1178, affirmed 267 F. 2d 127 (C.A. 1); Broome v. United States, 170 F. Supp. 613 (Ct. Cl.); Sonnabend v. Commissioner, 267 F. 2d 319 (C.A. 1), affirming per curiam a Memorandum Opinion of this Court; Lynch v. Commissioner, 273 F. 2d 867 (C.A. 2), affirming 31 T.C. 990 and Leslie Julian, 31 T.C. 998; Egbert J. Miles, 31 T.C. 1001; Jookmus v. United States, 335 F. 2d 23 (C.A. 2) ; Becker v. Commissioner, 227 F. 2d 146 (C.A. 2), affirming a Memorandum Opinion of this Court; Gheen v. Commissioner, 331 F. 2d 470 (C.A. 6); Rubin v. United States, 304 F. 2d 766 (C.A.7); Lewis v. Commissioner, 328 F. 2d 634 (C.A. 7), affirming a Memorandum Opinion of this Court; Morris R. DeWoskin, 35 T.C. 356, appeal dismissed (C.A. 7); Perry A. Nichols, 37 T.C. 772, affirmed 314 F. 2d 337 (C.A. 5); MacRae v. Commissioner, 294 F. 2d 56 (C.A. 9), affirming in part and remanding in part 34 T.C. 20, certiorari denied 368 U.S. 955; Kaye v. Commissioner, 287 F. 2d 40 (C.A. 9), affirming per curiam 33 T.C. 511; Milton Hart, 41 T.C. 131; Carl Shapiro, 40 T.C. 34; cf. Knetsch v. United States, 364 U.S. 361; Amor F. Pierce, 37 T.C. 1039, affirmed 311 F. 2d 894 (C.A. 9); A. A. Helwig, 37 T.C. 1046; United States v. Roderick, 290 F. 2d 823 (C.A. 5); Bridges v. Commissioner, 325 F. 2d 180 (C.A. 4), affirming 39 T.C. 1064; Weller v. Commissioner, 270 F. 2d 294 (C.A. 3), affirming 31 T.C. 33 and W. Stuart Emmons, 31 T.C. 26, certiorari denied 364 U.S. 908; William R. Lovett, 37 T.C. 317.
Petitioner’s “purchase” and “resale” of 3,000 phantom shares of Railway stock consisted in substance of nothing more than a bucket-shop-type transaction.4 Although it argues earnestly that, whatever may have been. Keizer’s intentions, Feuerstein intended to make a bona fide purchase in its behalf, we do not take so generous a view of Feuerstein’s intentions. We think that he fully understood that he was entering into a transaction that was to be promptly reversed without any delivery of securities. Moreover, even if his testimony were to be accepted at face, a taxpayer’s possible good faith cannot change the nature of what is otherwise a sham transaction. See Bornstein v. Commissioner, 334 F. 2d 779 (C.A. 1), affirming a Memorandum Opinion of this Court; Jockmus v. United States, supra; Lynch v. Commissioner, 273 F. 2d 867, 872 (C.A. 2); Gheen v. Commissioner, supra; Perry A. Nichols, 37 T.C. 772, 788-789, affirmed 314 F. 2d 337, 338 (C.A. 5); MacRae v. Commissioner, 294 F. 2d 56, 59 (C.A. 9), certiorari denied 368 U.S. 955. Cf. Sammy Cahn, 41 T.C. 858, 875, fn. 4.
We do not express any opinion as to whether petitioner would have become entitled to the tax benefits it seeks if it had actually purchased Railway stock dividend on and then sold it ex dividend, all in accord with a preexisting plan.5 We cannot find on the record before us that it ever purchased any Railway stock, or that Keizer & Co. ever made a bona fide short sale of such stock to petitioner.6 It is one thing to make a genuine short sale, intending to effect delivery thereafter; it is quite another thing to go through the form of executing a short sale without intending to make delivery. The burden of proof was upon the petitioner, and the testimony offered by it to carry that burden did not ring true.
2. Petitioner contends alternatively that if the first issue should be decided against it, as was done above, it is nevertheless entitled to deduct its “out-of-pocket expenses” in the amount of $2,805. Actually, petitioner did not make any specific expenditure in that amount. That figure reflects its net loss on the transaction and represents the difference between the $93,600 which petitioner paid Keizer & Co. as part of the purported purchase price for the 3,000 shares of Kailway stock and the sum of the two amounts which it received from Keizer & Co., namely, $75,795 as the balance in its account upon the alleged resale of those shares and $15,000 as a “dividend” thereon.
Petitioner seeks the $2,805 deduction on either of two grounds: (i) As a short-term capital loss upon the sale of an “option” under sections 1234(a) 7 and 165 8 of the 1954 Code, or (ii) as an “ordinary and necessary” business expense under section 162 (a) .9 We hold that the claimed deduction is not allowable under any of those provisions.
(i) Petitioner argues that it could have demanded delivery from Keizer & Co. of 3,000 shares of Kailway stock “upon payment of $62,400, the ‘exercise price,’ ” that on February 15, 1955, it “sold the option to Keizer & Co. * * * and suffered a loss,” and that such loss upon the “sale of the option” was deductible under sections 1234(a) and 165. Its position in this respect rests upon pure fiction and a strained interpretation of the term “option.”
Petitioner did not hold any “option” as that term is ordinarily understood, and it confuses the difference between an option and what purports to be an executed contract of sale. See Lawler v. Commissioner, 78 F. 2d 567, 568 (C.A. 9). Pursuant to its arrangement with Keizer & Co., petitioner purported to make an outright purchase of 3,000 shares of Kailway stock and then purported to make an outright resale of these shares on the following day. No “option” of any kind was involved, and it would require a judicial tour de force to press this case into the mold of section 1234. The inapplicability of the-option loss provisions in situations of this kind was fully spelled out in Morris B. DeWosTcin, 35 T.C. 356, appeal dismissed (C.A. 7), dealing with the corresponding provisions in section 117 (g) (2) of the 1939 Code. And the Court of Appeals for the Seventh Circuit recently reached the same result in Lewis v. Commissioner, 328 F. 2d 634. We follow DeWosldn and Lewis here.
The dictum in Goodstein v. Commissioner, 267 F. 2d 127, 132 (C.A. 1), relied upon by petitioner, was plainly not concerned with the foregoing considerations. Moreover, Goodstein and the two other cases relied upon by petitioner in respect of this issue (Becker v. Commissioner, 277 F. 2d 146 (C.A. 2); MacRae v. Commissioner, 294 F. 2d 66 (C.A. 9)) are distinguishable here. In Goodstein (pp. 131, 132), the court found that the taxpayer promised to pay Seaboard $9,929,-212.71 at any time he might select and that Seaboard promised to acquire and deliver to the taxpayer, on the date he selects, certain Treasury notes in the face amount of $10 million. Both Beoher (p. 148) and MaoRae (p. 60) found similar promises on the part of the taxpayer and the purported lender, respectively. There is thus a crucial distinction between the instant case and the three cases relied on by petitioner.10 Here we have found that it was the understanding and intention of the parties that Keizer & Co. was not to deliver any Bailway stock. Petitioner promised to pay $166,000 to Keizer & Co. and Keizer & Co. promised to pay to petitioner $16,000 (the purported dividends on the Eailway stock) plus $138,196, which amount represented the selling price of the stock ex dividend, namely, $138,375, less a charge in the amount of $180 for tax on the purported sale. Kei-zer & Co.’s promise was to pay money in a bucket-shop-type transaction and not to deliver stock. Simply stated, petitioner incurred a loss because it received less money than it paid out, and the money it received in no way related to any right to require delivery of Bailway stock. There was no option to purchase “property” within the meaning of section 1234.
(ii) Nor is the claimed deduction of $2,805 allowable under section 162(a) as an ordinary and necessary business expense. Petitioner contends, and it is supported by evidence, that it from time to time made short-term investments in securities with funds temporarily not needed in its manufacturing business, that such investment activities were part of its business, and that therefore investment expenses thus incurred are deductible as business expenses. The difficulty with that contention here is that petitioner did not in fact make any bona fide investment in securities in respect of the alleged purchase of 3,000 shares of Bailway stock, short term or otherwise, and that in accordance with our finding this transaction was a sham. Any loss which it sustained in connection therewith was not an “ordinary and necessary” expense incurred “in carrying on * * * [its] trade or business.” Cf. Carl Shapiro, 40 T.C. 34, 39-40; MacRae v. Commissioner, 294 F. 2d 56, 59 (C.A. 9).
Furthermore, in view of the intention of the parties not to make delivery of the securities in which they purportedly dealt, there appears to have been a violation of the Massachusetts law against bucket-shop transactions. See fn. 4, supra. Accordingly, there may be serious doubt whether losses incurred in any such transaction, in contravention of the clearly defined public policy of the State, are in any event deductible by reason of that circumstance alone. Cf. Tank Truck Rentals v. Commissioner, 356 U.S. 30; Lilly v. Commissioner, 343 U.S. 90, 97.
Decision will be entered under Rule 50.