Taxpayer appeals from the determination of a deficiency of $1,249.65 for 1921, resulting from the disallowance by the Commissioner of a loss of $9,109.02 claimed by the decedent as a deduction upon his income-tax return for that year.
FINDINGS OF FACT.
Charles S. Boas was a resident of San Francisco, Calif., in the year 1921. A joint return of the income of Boas and his wife was filed for that year.
On May 21, 1910, Mrs. Charles S. Boas loaned to the Northern Electric Railway Co. $12,500, receiving the note of that company dated May 21, 1910, payable six months after date, for the payment of said sum with interest at 6 per cent. The note was endorsed and payment thereof with interest guaranteed by four individuals. The note was also secured by the deposit as collateral of $25,000 par value of the first and consolidated mortgage 5 per cent 40-year gold bonds of Northern Electric Railway Co. and contained the usual power authorizing the holder of the note to sell and dispose of the *523collateral at public or private sale, with or without notice, in the event of default in the payment of principal or interest.
In or about the year 1914 the Northern Electric Railway Co. went into the hands of a receiver appointed by the United States District Court for the Northern District of California, an'd thereafter the properties of that company were sold under foreclosure and purchased by a committee for the bondholders acting pursuant to the terms of a plan and agreement of reorganization. The $25,000 par value of bonds given to secure the note held by Mrs. Boas were deposited with the reorganization committee in the name of Charles S. Boas and there were thereafter delivered to him as a result of such reorganization, in 1918 or 1919, stocks and bonds of the Sacramento-Northern Electric Railroad Co. (the company formed by the reorganization committee to take over the assets of the bankrupt) as follows:
$1,300 par value class A bonds.
$608.75 par value class B bonds.
$811.50 par value class O bonds.
$811.50 par value class D bonds.
$1,216.75 par value first preferred stock.
$3,677 par value second preferred stock.
$5,182.50 par value common stock.
The bonds, except for fractional amounts, were bearer bonds. The stocks and bonds for fractional amounts were issued in the name of Charles S. Boas.
At the time the bonds were deposited the sum of $650 was paid in to the reorganization committee.
The obligation of the Northern Electric Railway Co. upon the note was valueless at all times subsequent to 1917. The receivership of the Northern Electric Co. was terminated in 1918 and nothing was realized from the obligation of that company upon the note.
In 1918, subsequent to the receipt of the securities from the reorganization committee, the sum of $1,625.11 ivas paid by the endorsers upon the note as a part of a composition by- these endorsers with their creditors and the endorsers were thereupon discharged from liability.
The stocks and bonds received on the reorganization were sold by Boas in 1921 for $1,765.87.
In depositing the collateral with the reorganization committee and in selling the securities, Boas acted for his wife.
DECISION.
The deficiency determined by the Commissioner is disallowed.
ARttndell not participating.