
    ROBERT W. ATKINS v. THE UNITED STATES
    [No. 42061.
    Decided April 6, 1936]
    
      Mr. Alex M. Hamburg for the plaintiff.
    
      Mr. Joseph H. Sheppard, with whom was Mr. Robert H. Jaehson, Assistant Attorney General, for the defendant.
   Williams, Judge,

delivered the opinion of the court:

The plaintiff seeks to recover $10,433.20, an alleged overpayment of his Federal income tax for the calendar year 1928. The claim is based on the contention that the plaintiff is entitled to deduct from his gross income for the year 1928 the amount of a loss sustained by him in the year 1927.

Plaintiff’s income tax return for the year 1927 showed a loss of $56,186.33 and no tax due. In arriving at the amount of the loss plaintiff took deductions in his return of $132,895.05 on account of certain Florida real-estate transactions. The Commissioner of Internal Eevenue upon subsequent audit o'f the return reduced the loss to $55,676.33.

Plaintiff’s income tax return for the year 1928 showed a net taxable income of $82,210.88 and a tax due of $10,805.71, which was duly paid. Plaintiff made no claim in the return for a deduction from gross income-because of the loss sustained in the preceding year, but subsequently filed a claim for refund in respect to the taxes paid on the return, assigning the following grounds therefor:

The claimant is engaged in the banking business and deals in securities and other properties with a view to profit. The result of his business operations for the taxable year 1927 resulted in a net loss of $56,186.33. For the year 1928 his business operations resulted in a net profit upon which tax was paid without claiming deduction allowed by Section 117 of the Eevenue Act of 1928.

The Commissioner disallowed the claim for refund on the ground that the loss sustained in 1927 was not sustained in a trade or business regularly carried on by plaintiff, and therefore could not be carried forward to the year 1928 under the provisions of section 117 of the Revenue Act of 1928. This section, so far as here pertinent, reads:

Snc. 117. Net losses, (a) Definition of “net loss.” — As used in this section the term “net loss” means the excess of the deductions allowed by this title over the gross income, with the following exceptions and limitations:
(1) Nonbusiness deductions. — Deductions otherwise allowed by law not attributable to the operation of a trade or business regularly carried on by the taxpayer shall be allowed only to the extent of the amount of the gross income not derived from such trade or business;
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(e) Net loss foe 192G oe 1927. — If for the taxable year 1926 or 1927 a taxpayer sustained a net loss within the provisions of the Revenue Act of 1926, the amount of such net loss shall be allowed as a deduction in computing net income for the two succeeding taxable years to the same extent and in the same manner as a net loss sustained for one taxable year is, under this Act, allowed as a deduction for the two succeeding taxable years.

The definition of net losses in section 206 (a) (1) of the Revenue Act of 1926 is the same as that given in section 117 (a) (1) of the 1928 act above quoted.

The sole question is whether the losses sustained by plaintiff during the year 1927 in connection with his transactions in-Florida real estate were incurred in the operation of a trade or business regularly carried on by him.

What constitutes a trade or business for net loss purposes under the various Revenue Acts has been stated by the courts and the Board of Tax Appeals in numerous cases, and that question has been quite definitely settled. In Rogers v. United States, 70 C. Cls. 159, 41 Fed. (2d) 865, this court said:

The words “trade or business”, as used in the statute in connection with losses, has been held by the courts to mean and refer to a regular occupation or calling of the taxpayer for the purpose of livelihood or profit. Flint v. Stone Tracy Co., 220 U. S. 107, 171, 31 S. Ct. 342, 55 L. Ed. 389, Ann. Cas. 1912B, 1312; Allen v. Commonwealth, 188 Mass. 59, 74 N. E. 287, 69 L. R. A. 599.
While it has been, recognized and held by the courts and by the Board of Tax Appeals that a person can be engaged in more than one trade or business, and that it is not necessary that the trade or business in which a deduction is sought forms a taxpayer’s principal trade or business, it is required that his activities shall be such that they may of themselves be regarded as an occupation or business. A single isolated activity or transaction is not sufficient to constitute a business or trade. J. J. Harrington, 1 B. T. A. 11; Fridolin Pabst, 6 B. T. A. 843; Harry J. Gutman, 7 B. T. A. 500.

In Dalton et al. v. Bowers, 56 Fed. (2d) 16, Judge Man-ton, speaking for the Circuit Court of Appeals, Second Circuit, said:

By the statute, allowing the deductions and carrying over the loss for two years, Congress intended to give relief to persons engaged in an established business for losses incurred during a year of depression in order to equalize taxation in the two succeeding and more profitable years. It was not intended to apply to occasional or isolated losses.

This language was quoted with approval by the Supreme Court in Dalton v. Bowers, 287 U. S. 404.

The extent of the plaintiff’s real estate dealings was limited to three purchases of lots in Florida, two in 1925 and one in 1926, and the disposition of such lots in 1927 at a loss of $132,895.05. The plaintiff stated in his income tax returns'for the years 1926, 1927, 1928, and 1929, that his occupation was that of “banker.” Prior to the date of his investments in Florida lots it appears plaintiff was in the promotion and finance business generally in connection with hotels, race track and casino properties, real estate, sugar and other business enterprises, also the purchase and sale of stocks and bonds. From early in 1926 and during the years 1927 and 1928, he held a position with the brokerage firm of Hayden, Stone & Co., of New York, receiving a salary of $25,000 for 1927 and $30,000 for 1928. Under the terms of his employment he was permitted to engage in other activities for his own individual profit and advantage, which he did, and in 1927 and 1928 dealt extensively in stocks and bonds on his own and his Avife’s account, such transactions amounting to $1,700,000 in 1927 and $2,500,000 in 1928, upon which he realized a net profit for each of the years.

We think it clear that plaintiff’s investments in Florida real estate were isolated transactions in no way connected with any trade or business regularly carried on by him. The loss sustained by him on the disposition of these properties in 1927 was properly deducted from gross income for that year under section 214 (a) (5) of the Revenue Act of 1926 as a loss incurred in transactions “entered into for profit, though not connected with the trade or business.” Such loss, however, was not a net loss within the meaning of the Revenue Acts of 1926 and 1928 which could be carried over and deducted from gross income in a subsequent year.

The plaintiff is not entitled to recover. The petition is dismissed.

It is so ordered.

Whaley, Judge; LittletoN, Judge; GeeeN, Judge; and Booth, Chief Justice, concur.  