The opinion
Madden, Judge,
dissenting in part:
I am unable to agree with that part of the court’s decision which treats the $12,010.97 which Frederick Buchholz expended in 1925 to pay the debts of the business which he then took over, as a business loss to him upon his death. In the transaction with his mother, pursuant to which he paid out the $12,010.97, he received, in addition to the business and its tangible assets, the sum of $24,330.48 which was then on deposit in a bank, to the account of the business. Thus by the very transaction in which he paid $12,010.97 he received $24,330.48. In the opinion of the court, it is said that this sum was working capital which Frederick Buch-holz had no right to use, except for the carrying on of the business. The court apparently presumed, there being a complete absence of evidence on the subject, that Frederick Buchholz did not use any part of this money to pay the debts, taxes, and expenses of administration of his father’s estate. This conclusion, it seems to me, requires further examination.
The agreement quoted in Finding 6 between Frederick and his mother Christina, and Mr. Peele, one of the executors, recited that Christina desired to have all the assets of the restaurant business turned over to her by the executors so that she could turn them over to Frederick. Frederick and his mother then covenant and agree, jointly and severally, to provide the funds to pay the debts, taxes, and expenses of administration of the estate. I think they meant that the money, which Christina was to receive pursuant to the agreement, and was to immediately turn over to Frederick, was to be available for that purpose.
*46 The court says that the money in the bank thus turned over was working capital. So far as is known, all or some of it may have been profits. If so, and it was left intact, as the court says it should have been, and therefore presumes that it was, that would have made Frederick’s profits for the next accounting period that much larger, since the so-called working capital would have been available to pay the expenses of the business. Whether Frederick did so keep his accounts, and pay income taxes upon his profits as so increased, we have, of course, no idea. The court apparently presumes that he did.
The whole arrangement between Frederick and his mother seems to me to throw doubt upon the correctness of any assumption that the strict and technically accurate accounting which might have been required between strangers dealing at arm’s length was required of Frederick. The plaintiffs seem to be winning a suit without proof, upon the basis of presumptions which may well be contrary to the facts.
There is, I think, another impediment to the plaintiffs’ recovery on this part of their case. Section 24 (b) (1) of the Internal Revenue Code provides:
In computing net income no deduction shall in any case be allowed in respect of losses from sales or exchanges of property, directly or indirectly—
(A) between members of a family as defined in paragraph (2) (D).
The definition referred to includes parents and children.
The transfer of the property from Christina to Frederick was a sale. It was made in consideration of certain promised payments and certain required conduct in the carrying on and preservation of the business. Assuming, as the court does, that Frederick paid some $12,000 for the business, in addition to the other promised payments and promised conduct, the plaintiffs’ claim is that Frederick lost the $12,000 because, under the terms of the sale, he lost the business for which he had paid the $12,000, when it reverted to his mother because he predeceased her. It was, therefore, a loss from a sale between a mother and her son. If a son paid his mother a substantial sum for a conveyance by her to him of a life estate in property, and died a week later, the loss resulting *47 from what turned out to be a bad bargain would be a loss from a sale between a mother and her son. And so is the asserted loss in the instant case.