The opinion
FRITZ B. CAMPEN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
Campen v. Commissioner
Docket No. 21986.
United States Board of Tax Appeals
16 B.T.A. 543 ; 1929 BTA LEXIS 2559 ;
May 14, 1929 , Promulgated
*2559 The loss sustained by petitioner in 1921 on the sale of stock did not arise from the operation of a trade or business regularly carried on by him, and may not be used in determining a net loss for deduction purposes in the succeeding year.
F. R. Gibbs, Esq., for the petitioner.
George S. Herr, Esq., for the respondent.
ARUNDELL
*543 Respondent has determined a deficiency of $644.05 in income tax for the year 1922. The issues are whether a loss sustained in 1921 on the sale of certain stock may be used in computing a net loss of the petitioner for the year to be applied as a deduction from net income in the succeeding year, and whether a payment of $1,000 to the Industrial Association of Santa Clara County is deductible as a business expense.
FINDINGS OF FACT.
The petitioner, a resident of San Jose, Calif., in 1922 and prior thereto, owned a seven-fifteenths interest in the Normandin-Campen Co., a copartnership organized in 1903 to engage in the business of selling and repairing automobiles and selling automobile accessories and tires. He also owned and operated the Mission Motor Car Co., which he organized in the year 1919.
*544 *2560 Since about the year 1915 the Normandin-Campen Co. has had a "dealer-agency contract" with the Goodyear Tire & Rubber Co., Akron, Ohio, for the sale of Goodyear tires.
Sometime in the year 1919 the petitioner purchased 100 shares of preferred stock of the Goodyear Tire & Rubber Co. at a cost of $10,000. The purchase was made as the result of solicitations on the part of the Pacific Coast manager for the Goodyear Company. In purchasing the stock petitioner had in mind the making of a profitable investment, although he was also prompted by the belief that ownership of stock in the Goodyear Company would prove useful in retaining for the partnership its agency with that company. The stock purchased was issued in the name of petitioner. At or about the same time P. A. Maloney and L. O. Normandin, owners of the remaining interest in the copartnership, also purchased stock of the Goodyear Company through the same representative. Maloney purchased 5 shares of preferred and Normandin bought 10 shares of common. In 1921 the petitioner sold all of the Goodyear stock acquired in 1919 for $1,000.
During the years 1919 to 1922, inclusive, the petitioner devoted most of his time to the *2561 affairs of the Normandin-Campen Co. and the Mission Motor Car Co.
The petitioner, during the taxable year, was a member of the Industrial Association of Santa Clara County. The purpose of the association was to protect its members from what they believed to be unjust labor demands. The membership of the association was composed of business and professional men and an undisclosed number of labor organizations. Its board of directors consisted of men engaged in different lines of business and professions. The association was not being operated for profit. In 1922 the petitioner contributed to the association the sum of $1,000.
The petitioner, in his return for the year 1922, claimed as deductions a net loss of $7,147.60 for the year 1921 and the sum of $1,000 paid to the Industrial Association of Santa Clara County. The respondent determined that the loss alleged to have been sustained on the sale of Goodyear stock could not, if incurred, be used in computing net loss for the year 1921, applicable as a deduction from net income for the taxable year, and disallowed as a deduction the payment of $1,000.
OPINION.
ARUNDELL: The shares of stock of the Goodyear Tire & Rubber *2562 Co. were owned individually by petitioner and not by the partnership; they were purchased with his individual funds and the sale was made by him as an individual. Neither the purchase nor the sale of the Goodyear stock may be said to have been made in the regular *545 course of petitioner's business, which was that of a member of a partnership engaged in the selling and repairing of automobiles, the sale of automobile accessories, etc. While it is true that petitioner in purchasing the stock had in mind a possible benefit to the partnership in retaining for it the agency of the Goodyear Company, this fact is not sufficient to characterize the sale as one arising from the operation of a trade or business regularly carried on by petitioner within the meaning of section 204 of the Revenue Act of 1921.
The $1,000 paid in to the Industrial Association of Santa Clara County constitutes an ordinary and necessary business expense and as such was deductible in determining petitioner's net income. .
Judgment will be entered under Rule 50.