Hobby v. Commissioner

Black, J., dissenting: The findings of fact which are made the basis | of the majority opinion show that on January 1, 1939, petitioner | owned 1,575 shares of nonpar, second series, $6 dividend, preferred R stock of the Enterprise Co., Beaumont, Texas. All of these shares jj were redeemed in 1939 on the respective dates set out in the findings 1 of fact. Prior to their redemption petitioner made four alleged | sales which aggregated the number of shares which he owned. As to three of these sales, it is my view that the evidence establishes effective, completed sales and that at the time the shares of stock covered by these three sales were redeemed petitioner was not the owner thereof and can not be taxed thereon under section 115 (c) and (i) of the Internal Revenue Code. I agree to the treatment accorded these three sales by the majority opinion.

As to the alleged sale of 700 shares to E. H. Borden on September 1, 1939, I do not believe that the evidence is sufficient, when all the facts and circumstances are considered, to establish an effective and completed sale from petitioner to Borden. Borden, in consideration of his accommodating Hobby in this transaction, was to receive the $1,050 quarterly dividend to be paid on this stock October 1, 1939. The evidence shows that “by check dated September 29, 1939, the Enterprise Co. paid the dividend due October 1, 1939, to Borden in the amount of $1,050.” Under date of October 7, 1939, Borden credited this dividend back to Hobby upon the cost of an apartment building which he was at that time building for Hobby. Notwithstanding Borden’s explanation that he intended the credit of $1,050 as a gift to Hobby, I am unconvinced. I see no reason why he should be making a gift of $1,050 to Hobby.

It seems to me that this alleged sale should be treated as lacking reality and that Hobby should be regarded as the owner of these particular 700 shares on the date of their redemption. Cf. Commissioner v. Dyer, 74 Fed. (2d) 685. From the holding of the majority opinion with respect to this alleged sale, I respectfully dissent.