Sarfert v. Commissioner

*978OPINION.

It is the contention of the Commissioner that the purchase and sale of the marks was a part of the transaction of purchasing the machinery and the loss therefrom constitutes a part of the cost of such machinery, but that, if the Board should find that the purchase of the marks and the purchase of the machines were separate and distinct transactions, the purchase price of the marks having been paid, part in 1919 and the remainder in 1920, and the petitioner’s returns having been made on a cash basis, the loss should be deducted partly in 1919 and partly in 1920, the amounts of the deductions to be determined on the basis of the payments made in the respective years.

On the facts before us, there can be little room for doubt that the purchase and sale of the marks and the purchase of the machinery were separate and distinct transactions. Treating the purchase of the machinery in the manner most favorable to the Commissioner, that is, that there was a contract for the purchase of the machinery which required payment in marks, we are nevertheless confronted with the fact that such a contract was never carried out, but that the machinery was actually purchased under a new contract, separate and distinct, requiring payment in American dollars, and the mere fact that part of the price paid was procured from the sale of marks which the petitioner then had, even though such marks were purchased for carrying out the provisions of the original contract, is too remote and far removed to be considered a part of the final transaction. It does not appear, however, that the purchase of the marks was any part of the original contract, but rather that the marks were purchased purely for the convenience of the petitioner in making payment under such contract.

The petitioner has suffered a loss from the purchase and sale of 1,450,000 marks and is entitled to deduct this loss under section 214 of the Revenue Act of 1918 which provides:

Sec. 214. (a) That in computing net income there shall be allowed as deductions :

* * * * * * *

(4) Losses sustained during the taxable year and not compensated for by insurance or otherwise, if incurred in trade or business.

The Commissioner takes the position that a deduction should be allowed in 1919 only to the extent that the payment on the purchase price of the marks made in that year exceeds the sale price. In this regard we need only to call attention to the fact that the loss was sustained on the sale of the marks in 1919, and that on consum*979mation of the sale the loss was definitely fixed and determined, and the fact that the account with Hans Weniger & Co. was not fully paid until 1920 can not make a loss sustained in 1919 deductible in 1920.

Judgment will he entered after 15 days' notice, under Bule 50.