The opinion
Murdock,
dissenting: Although I do not subscribe to the reasoning upon the first point, nevertheless, the correct result is reached. But I feel that the short sales issue is incorrectly decided.
The sales involved were not transacted as short sales through a broker in accordance with the rules of the New York Stock Exchange. The broker bought and sold in the “regular way.” However, the sales must be treated for tax purposes, at least, as short sales because each sale lacked a basis until a “matching purchase” was made. The petitioner borrowed a large supply of shares from his family corporations. The management company acted in his behalf and kept account of all transactions in short account No. 18. The finding is that “all of the purchases” “were matched against the earliest sales in that account not theretofore matched, for the purpose of reflecting the gain or loss on such sales” and the petitioner reported his gains and losses in accordance with that account. He apparently deemed unimportant the return of the borrowed shares to his family corporation. I think he made his reports correctly, the Commissioner erred, and the Board has made an unwise decision by attaching undue importance to the return of the shares.
While a short sale made with borrowed shares is not complete for all purposes until the borrowed shares are returned, nevertheless, that event is not essential to the completion of a taxable transaction where, as here, the short sales have already been “matched” by purchases. The “matching purchase” fixed the gain or loss and completed the transaction for taxing purposes. The petitioner is right in arguing that the matching purchases are not distinguishable from “covering purchases.” They reduced the short balance in the account. Suppose the petitioner had never returned the borrowed shares to his family corporation, would, he thereby escape tax forever? The rule here adopted by the Board will permit short sellers to choose their own tax year after their gain or loss has become fixed. Cf. Ruml v. Commissioner, 83 Fed. (2d) 257; Commissioner v. Dashiell, 100 Fed. (2d) 625; Dee Furey Mott, 35 B. T. A. 195. Surely, the Commissioner does not want such a rule established. I see no wisdom in it or justification for it.
AruNdell, Ssiith, VaN FossáN, Mellott, and HarroN agree with this dissent.