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37 B.T.A. 479

Otto v. Commissioner

United States Board of Tax Appeals

Decided March 17, 1938

United States Board of Tax Appeals · decided 1938-03-17

Taxpayer entered an order through a broker's office in Washington for the purchase of certain New York bank stock, on December 30, 1930. The broker was a dealer in such stock. Held: taxpayer did not obtain title to the stock on December 30, 1930, did not hold same for two years, and therefore, may not deduct a loss resulting from the sale thereof as a capital loss.

Cited by 3 later decisions — most recently November 1938

Good law ✅— No negative treatment on recordhow we know

Decided 1938-03-17

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Murdock,

¶1concurring: The reasoning of the prevailing opinion leads irresistibly to the conclusion that the period of “more than two years” during which property is “held by the taxpayer” begins only at the time title to the property passes to the taxpayer. Yet, I think it is unfortunate that the Board was required to render such a decision because I believe that a different method of computing the period of ownership has been generally used up to this time. Many purchases of securities are made by taxpayers through brokers. The broker notifies his customer that a purchase has been made upon a certain day. The customer in making up his income tax return generally uses the date of purchase in computing his period of ownership. The Commissioner has accepted and has himself applied that method of computing the period of ownership in innumerable cases. The present opinion holds that that method is not in accordance with the law. Claims for deficiencies and refunds may be expected in a great many cases as a result of this decision.

¶2The difficulty of correctly reporting gains and losses will be increased tremendously if this opinion is followed, as will the work of the Commissioner in auditing returns. Taxpayers who have made a purchase of securities through a broker seldom know the exact day upon which title to the securities purchased passes to them. They are notified by the broker of the day upon which the purchase was made and perhaps of the settlement date. It now appears that ithe date of purchase is unimportant and the taxpayer-customer must learn from the broker, if he can, the facts pertaining to the passing of title. Those facts may not be readily available. The taxpayer, after he learns the facts, will have to decide the legal question of exactly when title passed. Many taxpayers are not qualified to decide that question, even with full knowledge of the facts.

¶3*485Although in the present case the decision is in the Commissioner’s favor, the principle established will apply equally to the advantage of taxpayers in the case of losses. If, as I have some reason to believe, this is an unfortunate decision, it may, at least, demonstrate that not all rights should be pressed through litigation. The Board, of course, has no alternative but to decide the case, and the law seems to be as stated in this opinion.

Mellott agrees with the above.
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