Geoghegan v. Commissioner

A. D. GEOGHEGAN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. MRS. A. D. GEOGHEGAN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Geoghegan v. Commissioner Docket Nos. 64134, 64135. United States Board of Tax Appeals 31 B.T.A. 93; 1934 BTA LEXIS 1166; August 14, 1934, Promulgated *1166 When a taxpayer sells a portion of his shares in a corporation, the delivery of the earlier acquired certificates is evidence of his intention to sell the earlier acquired shares. Justin V. Wolff, Esq., for the petitioners. Frank B. Schlosser, Esq., for the respondent. STERNHAGEN *93 The Commissioner determined income tax deficiencies of $6,845.78 for 1927, $1,349.68 for 1928, and $9,226.36 for 1929, as to A. D. Geoghegan, and $6,673.85 for 1927, $1,031.41 for 1928, and $8,996.29 for 1929, as to his wife. The only point which has not been settled by the parties is the respondent's determination that shares sold at a profit in 1927 were those earliest acquired. The deficiencies for 1929 and 1930 have been stipulated. FINDINGS OF FACT. Petitioners are husband and wife residing in New Orleans, Louisiana. They filed separate returns on the community property basis. A. D. Geoghegan acquired 14,200 shares of Wesson Oil & Snowdrift Co. in 1925, when that corporation was organized. He thus became its largest shareholder. In February 1927 he exercised a right to subscribe for 1,578 shares at $50 each. In June 1927 he purchased 222 shares*1167 for $55 each. Thus he was the owner of 16,000 shares when in August 1927 he was requested by a banking firm to sell 5,000 shares at $60 each. He tried to get others to sell their *94 shares up to this amount, and succeeded as to 2,811 shares. He sold 2,189 of his own shares. He did not at that time think of the tax result and it made no difference to him otherwise whether he sold his older or his newer shares. He wanted as far as possible not to disturb his original investment. The purchaser made no point of the source of the shares or certificates to be bought. On petitioner's accounts, his secretary recorded the transaction as a sale by petitioner of 1,578 shares which had cost $50 each, and 222 shares which had cost $55 each, and made no record of the sale of 389 shares. The shares sold by petitioner were delivered by him out of the first 14,200 shares acquired and he retained his certificates of the 1,800 shares acquired in 1927, and the petitioner did not at the time of delivery think about whether there was any tax significance in the use of different certificates. OPINION. STERNHAGEN: The respondent's determination treats the shares sold by petitioner in*1168 1927 as being some of those acquired in 1925 and measures the gain as the difference between the cost of such shares and the total sale price. Petitioner contends that the basis to be used as to 1,800 shares is the cost of those shares which he bought in 1927. The foundation upon which petitioner rests is his present testimony that he intended to sell the later acquired shares. We think, however, that the evidence shows otherwise. It shows that, if any identification as to shares could have been recognized, he actually used the earlier certificates and that his only intention was "not to disturb his original investment" any more than he could help. Clearly the identity of shares or certificates did not affect his investment. His investment was pro tanto the same whether he retained one certificate or sold one group of shares or another. It was not until he learned that his taxes were affected that he realized a possible importance in which shares or certificates he used. But this was long after the event. So we say that, even if mere intent is controlling, cf. *1169 , the intent to sell the later shares is not proven. But if actual intent were proven by petitioner's oral testimony at the hearing, it would still be true that he voluntarily sold shares from the earlier block and used the earlier certificate for the purpose of delivery. This actual conduct is more important as evidence of his intent than his afterthought. His secretary's accounting does not determine what petitioner had done as a matter of law. Since we think that, even assuming that the shares are susceptible of identification, the respondent correctly held that the petitioner sold the earlier, it is unnecessary to consider whether they were identifiable. If they were not, the first in, first out rule sustains the *95 determination. ; ; ; ; *1170 ; ; ; ; ; ; . Judgment will be entered under Rule 50.