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8 B.T.A. 1029

Lloyd v. Commissioner

United States Board of Tax Appeals

Decided October 28, 1927

United States Board of Tax Appeals · decided 1927-10-28

Amount expended by petitioner in an unsuccessful effort to secure a secret formula for the corporation of which he was president, under an agreement whereby he was to be reimbursed if the venture was successful, held deductible as a loss.

Key passage — most relied on by later courts

“* * * We are further of the opinion that the loss was “ incurred in trade or business ” in that the furtherance of the business of the eompany of which he was president was legally and logically his business.”

quoted by 1 later decision, including Wiggin v. Commissioner

Relies on Foehrenbach v. German-American Title & Trust Co. · Schambs v. Fidelity & Casualty Co. of New York

Good law ✅— No negative treatment on recordhow we know

Decided 1927-10-28

How this case has been cited

Cited by 8 later decisions — most recently November 1958

1 federal appellate ·

501927193019401950decided

Later decisions citing this case, by decade. The current decade is in progress, and our corpus holds fewer opinions from the most recent years, so the latest bars are undercounted — not a real decline.

View the full empirical analysis of this case →

¶1*1030OPINION.

ARundell :

¶2The amount expended by petitioner in 1922 is claimed under section 214(a) (4) of the Revenue Act of 1921 providing for the deduction of:

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

¶3The word “ loss ” is a comprehensive one. As said in Electric Reduction Co. v. Lewellyn, 11 Fed. (2d) 493; 5 Am. Fed. Tax Rep. 5897:

“ Failure to keep that which one has is a loss.” Foehrenbach v. German-American Title & Trust Co., 6 A. 561, 217 Pa. 332, 12 L. R. A. (N. S.) 465, 118 Am. St. Rep. 916. There are many kinds of loss: Money out of pocket; a judgment, changing the status from solvency to insolvency. Schambs v. Fidelity & Casualty Co., 259 F. 55, 58, 170 C. C. A. 55, 6 A. L. R. 1231.

¶4Petitioner here spent the sum of $5,748.94 and was unable to secure reimbursement due to the failure of the project. Had the venture been successful, he would have been repaid. As the matter stood at the close of the taxable year he was out of pocket the sum claimed. It was, as we see it, a loss “ not compensated for.” We are further of the opinion that the loss was “ incurred in trade or business ” in that the furtherance of the business of the company of which he was president was legally and logically his business.

¶5Judgment will be entered on 15 days' notice, under rule 50.

Considered by Lansdon, Sternhagen, and Green.
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