Stoddard v. Commissioner

APPEAL OF HENRY STODDARD. Stoddard v. Commissioner Docket No. 3198. United States Board of Tax Appeals 3 B.T.A. 79; 1925 BTA LEXIS 2031; November 20, 1925, Decided Submitted September 25, 1925. *2031 William B. Dana, Esq., for the taxpayer. Ward Loveless, Esq., for the Commissioner. *79 Before GRAUPNER, TRAMMELL and PHILLIPS. This is an appeal from the determination of a deficiency of $3,930.48 in income tax for the calendar years 1919, 1920, and 1921. The question involved is whether the taxpayer is entitled to deduct a claimed loss on the sale of securities which were held by trustees under an instrument given by the taxpayer. *80 FINDINGS OF FACT. The taxpayer is an individual and a resident of Connecticut. For a number of years in has been the custom of the taxpayer and his wife, both of whom are of advanced age, to spend the winter of each year in the South. On December 21, 1916, the taxpayer executed and Clifford I. Stoddard and the Union & New Haven Trust Co. accepted the trust created by the following instrument: I, Henry Stoddard, of the Town of Woodbridge, State of Connecticut, do hereby give, grant, sell, assign, transfer and convey unto my son, Clifford I. Stoddard, of said Woodbridge, as trustee, and unto the Union & New Haven Trust Company, a corporation organized under the laws of the State of Connecticut and located*2032 in said New Haven, as co-trustee, with my son Cliford, the several items of property noted in the schedule or schedules of property hereto annexed, marked "Exhibit A," and made part hereof. The said trustees are to take, hold and dispose of said property upon the trust and subject to the conditions stated in this instrument. Said trustees shall have power to invest or reinvest any part of the principal of the trust fund, to change investments, and for that purpose to sell, convey, pledge and mortgage said trust fund at discretion to hold the same during my life, collect the income and to pay over to my wife, Amelia E. Stoddard, annually three thousand dollars ($3,000), to be paid in equal quarterly installments, on or about the 16th days of January, April, July and October in each year, and at such times to pay over the balance of said net income to me during the full term of my life. At my death, the said trustees are to pay over and deliver to the trustees named in my will all the trust fund, principal, and income, to be held by such trustees named in my will upon the trusts and as a part of the trust fund created, established and provided for in my will. I hereby reserve the*2033 right to withdraw from said trust fund any and each item of property, and add thereto at my discretion, and I also reserve the right to terminate this trust, either in whole or in part, at my discretion, and in case of the exercise of such reserved right of withdrawal of any item of property, or of terminating this trust, in whole or in part, then and in such event, the trust shall terminate and the property shall be thereupon returned to me. Subsequent to the execution of this instrument the following securities, which are referred to in the instrument as being listed in "Exhibit A," were delivered to the Union & New Haven Trust Co. and placed in a safe-deposit box: 500 shares, Brooklyn Rapid Transit Co. 100 shares, Scranton Electric Co., preferred. 100 shares, Mackay Co., preferred. 400 shares, Interborough Consolidated Corporation, preferred. 300 shares, American Telephone & Telegraph Co. 300 shares, The General Electric Co. 161 shares, The Associated Drygoods Corporation, first preferred. 80 shares, The Associated Drygoods Corporation, second preferred. *81 $13,000 par value, New York, New Haven & Hartford Railroad Co.'s debenture, due March*2034 1st, 1947, numbers 1028 to 1031, both inclusive, 1045, 1712 to 1717, both inclusive, 1937 and 1938. The stock certificates representing part of the securities were transferred to Cliford I. Stoddard and the Union & New Haven Trust Co., trustees under the deed of Henry Stoddard. Subsequently, Henry Stoddard, Amelia E. Stoddard, Clifford I. Stoddard, and the Union & New Haven Trust Co. executed the following instrument: Memorandum agreement, made this 28th day of October, 1918, by Amelia E. Stoddard and Henry Stoddard, husband and wife, with Clifford I. Stoddard and Union and New Haven Trust Company, Trustees. Witnesseth, that the said Amelia E. Stoddard has and does assign to said trustees the securities mentioned in the schedule annexed hereto, in trust, however, to collect and pay over the income and account for the principal as is herein stated. The trustees are to collect the income and add the same to the income received by said trustees from the Henry Stoddard Trust. The net joint income so received is to be paid over by said trustees to said Henry and Amelia E. Stoddard, one-half to each at the times and in the manner mentioned in the Henry Stoddard Trust. Said*2035 Amelia E. Stoddard may add to said trust or withdraw therefrom any securities at her pleasure and this trust terminates upon her death, and in such case, the trustees will turn over the trust property to her executors and administrators. Said Henry Stoddard agrees to the equal division of said joint net income and becomes a party hereto for that purpose. Henry Stoddard, from time to time after the execution of the instrument in 1916, directed the sale of certain securities held by the trustees and the addition thereto of others. During the years 1919, 1920, and 1921, certain of the securities held by the trustees under the Henry Stoddard instrument were sold at losses in the amounts of $2,482.80, $7,360.91, and $12,963.54, respectively. Of the securities sold all except certain Liberty Loan Bonds, Victory notes, and Anglo-French bonds were acquired by Stoddard prior to the creation of the so-called trust in 1916. The Liberty Loan bonds and Victory notes were sold in 1921 at a loss of $171.23. The Anglo-French bonds were sold in 1920 at a profit $310of. The amount of the losses on securities acquired before March 1, 1913, was computed on the basis of cost or March 1, 1913, value, *2036 whichever was lower. The taxpayer at all times retained control of the securities held by the trustees and directed the sales of securities and the investment of funds held by them. In some cases the proceeds of sales were paid directly to the taxpayer and in others they were paid to the trustees. In October, 1924, the taxpayer and his wife revoked, in writing, the instruments they had formerly executed, and the trustees returned to them the securities which they, the trustees, then held. *82 DECISION. The determination of the Commissioner is approved. ; .