Opinion
Proceeding by James T. McMillan against the United States.
Petition dismissed.
Frederick O. Graves, of Washington, D. C. (Miller & Chevalier, of Washington, D. C., on the briefs), for plaintiff.
Guy Patten, of Washington, D. C., and James W. Morris, Asst. Atty. Gen. (Robert H. Jackson, Asst. Atty. Gen., and Robert N. Anderson and Fred K. Dyar, both of Washington, D. C., on the briefs) for the United States.
Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.
The court, upon a stipulation of the facts and the evidence, makes the following special findings of fact:
1. The plaintiff, James T. McMillan, is a citizen of the United States and a resident of Detroit, Mich.
2. On March 15, 1930, the plaintiff duly filed with the collector of internal revenue at Detroit, Mich., his federal income tax return for the calendar year 1929, disclosing therein a net income of $612,804.38, and a tax liability of $116,168.15. The tax so disclosed was paid by the plaintiff during the year 1930 in equal quarterly installments.
3. Thereafter, upon audit of the income tax return, the Commissioner of Internal Revenue determined that the plaintiff had overpaid his income tax liability for the year 1929 in the amount of $314.67, and the overpayment, together with interest thereon, was refunded to the plaintiff on January 14, 1932.
4. On February 29, 1932, plaintiff filed with the collector of internal revenue a claim for refund in which he asked for the refund of $1 or more upon the ground that:
'The taxpayer owned during 1929 and still owns bonds of Detroit, Jackson, and Chicago Railway Company on which relatively heavy losses have occurred due to the line having been abandoned. It may be that the Treasury Department may eventually decide that this loss should have been claimed by the taxpayer in his tax return for the year 1929 and this claim is therefore filed to protect the interest of the taxpayer.'
The claim for refund was rejected by the Commissioner of Internal Revenue on a schedule dated November 1, 1932, and plaintiff was duly notified of the rejection on that date.
5. Throughout the year 1929 the plaintiff owned consolidated mortgage 5 per cent gold bonds of Detroit, Jackson & Chicago Railway Company of a par value of $6,000 due February 1, 1937, which had been acquired in 1916 at a cost of $5,295.
Detroit, Jackson & Chicago Railway Company is a corporation organized under the laws of the state of Michigan as the successor of Detroit, Ypsilanti, Ann Arbor & Jackson Railway Company, which in turn succeeded Detroit, Ypsilanti & Ann Arbor Railway Company. On February 1, 1907, Detroit, Jackson & Chicago Railway Company issued its 30-year consolidated mortgage 5 per cent gold bonds, dated February 1, 1907, and due February 1, 1937. The total amount of such bonds issued and outstanding throughout the years 1929 and 1930 was $2,060,000. The mortgage which secured these bonds was a third lien on certain of the properties of the Railway Company, a second lien on certain other properties, and a first lien on still other properties. The bonded indebtedness of the Railway Company outstanding in 1929 and having priority over these particular bonds amounted to $1,940,000.
The Detroit, Jackson & Chicago Railway Company was placed in receivership in 1925. Shortly thereafter a bondholders' protective committee was formed by the bondholders to protect their interests. The aforesaid bonds of the plaintiff were deposited with the committee on October 21, 1925.
In 1929 the assets of Detroit, Jackson & Chicago Railway Company which were covered by the senior liens were disposed of, and nothing was received from the disposition of such assets which was available to the holders of the 5 per cent 30-year old bonds due in 1937. Thereafter, in 1929, operations of Detroit, Jackson & Chicago Railway Company were suspended by authority of the United States District Court.
The bondholders estimated that the balance of the assets owned by the Railway Company in 1929 available to the holders of the 5 per cent 30-year bonds would not exceed $75,000, and because of the small value of assets there were no foreclosure proceedings.
On December 30, 1931, there was written off on the books of the plaintiff as a loss on account of these bonds the sum of $4,095, which is the amount claimed herein as a loss in 1929. No part of this amount was allowed by the Commissioner of Internal Revenue as a deduction from gross income in computing the tax liability of the plaintiff for the year 1929 or the year 1930, and was not claimed or allowed for 1931.
6. The plaintiff was at all times herein mentioned thoroughly familiar with the status of Detroit, Jackson and Chicago Railway Company and with the bonds of the company.
PER CURIAM.
The essential facts in this case for all practical purposes are similar to the facts involved in the case of McMillan, Trustee, v. United States (Ct.Cl.) 18 F.Supp. 853, this day decided by the court. The issues and the questions of law involved are precisely the same. Under the decision in the McMillan Case the plaintiff is not entitled to recover. The petition is therefore dismissed.