Paxton v. Commissioner

7 B.T.A. 92

• Court: United States Board of Tax Appeals
• Decided: May 25, 1927
• Docket: Docket No. 5911
• Status: Published

Opinion

OPINION.

Trammell:

The question involved is whether the amount of $2,000, which is the total of the two assessments made on the stock owned by the petitioner in the First National Bank of Independence, Mo., in 1922, is deductible from the gross income of the petitioner in determining his net income for that year. The petitioner contends that the amount should be deducted from his income, while the respondent contends that the amount constituted additional expenditure which must be added to the original cost of the stock and that no gain or loss resulted therefrom during 1922, since the stock was not sold during that year.

The facts in this case are very similar to the facts in the Appeal of Harry E. Lutz, 2 B. T. A. 484, and we think that our decision there is applicable and controlling here. The additional assessments levied upon stock in a corporation constitute additional capital outlay by the stockholders in the acquisition of their stock. No deductible loss results from the transaction until the stock is sold or is shown to have become worthless. In this case it is not shown that the stock was sold, nor is there any evidence that the stock became worthless during the taxable year involved. The likelihood that the total capital investment could never be recovered and the probability that a loss would be realized on the sale of the stock is not sufficient to warrant a deduction prior to the happening of that event.

Judgment will be entered for the respondent.