Milliken:
This proceeding results from the determination of a deficiency in income tax for the calendar year 1921, in the amount of $823.31. Error is assigned in that the Commissioner, in determining the net income of petitioner for the year 1921, disallowed a deduction of $5,000 claimed as a loss sustained during the year in the stock of the Hercules Motor Co., which petitioner alleged became worthless in that year.
FINDINGS OF FACT.
Petitioner is an individual residing at Boston, Mass. In the year 1912, he purchased for $5,000 stock of the Plercules Motor Co. Said company was organized to manufacture "motor trucks and became, by assignment, the owner of certain patents which were believed to be valuable, particularly one designed to prevent the stripping of gears, which at that time was a serious problem in the construction of heavy trucks. The patents which the company received by assignment were secured by a man named Eckert, who upon the organization of the company became its superintendent. The company manufactured in its entire history not to exceed six 5-ton trucks and the trucks were manufactured in the year 1913 or 1914. It was desired also to manufacture 3-ton trucks. The superintendent refused to engage in the manufacture of 3-ton trucks and left the employ of the company about the year 1914, and clue to domestic troubles he left the United States. The company endeavored to engage the services of another as its superintendent but without success.
The success of the company depended almost entirely upon the retention of the services of Eckert. In the year 1914, the Hercules Motor Co. was dissolved by act of the legislature of the Commonwealth of Massachusetts. When the company was dissolved in 1914, it did not have enough assets to pay its outstanding obligations, and the various stockholders, including petitioner, contributed sums of money with which to meet its obligations and thus avert bankruptcy. The directors of the company endeavored to sell the patents which the company had acquired and carried on negotiations with the Mack Truck Co. for that purpose. In the year 1920 or 1921, a steel was invented or developed that reduced stripping of gears to the minimum and resulted in the patent of the company becoming practically worthless.
Petitioner sought, but was not permitted by respondent, to take a deduction for prior years on account of the stock becoming worthless. He testified as follows:
Q. Why did you take the deduction then?
A. Because I thought the thing was absolutely a certain loss.
. Q. Why did you think that?
A. What?
Q. Why did you think that?
A. The man had gone, skipped, and there was nobody to take his place and everything was idle and you couldn't get anything for the stock.
The stock of the Hercules Motor Co. did not become worthless in the year 1921.
Judgment will be entered for the respondent.