1945 U.S. Tax Ct. LEXIS 103">*103
Deduction -- Loss -- Worthlessness of Stock. -- Shares of bank stock held by an officer of the bank were capital assets, and the deductible loss resulting from their worthlessness is limited under
5 T.C. 600">*601 OPINION.
The Commissioner determined a deficiency of $ 23,766.56 in1945 U.S. Tax Ct. LEXIS 103">*104 the petitioner's income tax for the calendar year 1941. The facts have been stipulated. The petitioner claimed on his return a deduction of $ 72,016, representing the full cost to him on 2,771 shares of common stock of the Lamberton National Bank of Franklin, Pennsylvania. The Commissioner, in determining the deficiency, reduced the basis for computing gain or loss on this stock from $ 72,016 to $ 53,216. The petitioner accepts this adjustment as correct, but contends that the entire amount of this basis is deductible as a loss under
The petitioner is an individual who filed his income tax return for the calendar year 1941 with the collector of internal revenue for the twenty-third district of Pennsylvania, at Pittsburgh.
The Lamberton National Bank was organized in 1899 by members of the Lamberton family. The petitioner became vice president1945 U.S. Tax Ct. LEXIS 103">*105 and trust officer of the bank in 1919 and since then has been active in the affairs of the bank. He was elected president and trust officer in 1932 and continued in those positions until the bank was taken over by the Federal Deposit Insurance Corporation in December 1941 for the purpose of liquidating its assets. Twelve thousand five hundred shares of the stock of the bank were outstanding in 1941, of which the petitioner owned 2,771 shares. Most of the remaining shares were owned by persons related to the petitioner by blood or marriage. The common stock of the bank which the petitioner owned became entirely worthless in 1941.
The Commissioner recognizes that the petitioner sustained a loss that is deductible under
The petitioner argues that "It is not necessary to determine whether 5 T.C. 600">*602 or not the stock of the Lamberton National Bank in the hands of the petitioner was a capital asset" because, in any event, the loss is deductible under section (e) and no consideration need be given to the provisions of (g), because (g) does not limit (e).
We think this argument is obviously unsound.
The term "capital assets" means property held by the taxpayer (whether or not connected with his trade or business), but does not include stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business, or property, used in the trade or business, of a character which is subject to the allowance for depreciation provided in
The above definition is broad enough to include the stock here in question in the hands of this petitioner. The stock was property held by the petitioner, and, since it does not come under any of the exceptions, it is immaterial to determine1945 U.S. Tax Ct. LEXIS 103">*108 whether or not or to what extent it was connected with his trade or business. Cf.