Baker v. Commissioner of Internal Revenue, 81 F.2d 741 (3d Cir. 1936)

Edward H. Wilson, of New York City, for petitioner.

Frank J. Wideman, Asst. Atty. Gen., Francis I. Howley, of Washington, D. C., and Sewall Key and John MacC. Hudson, Sp. Assts. to the Atty. Gen., for respondent.

Before BUFFINGTON, DAVIS, and THOMPSON, Circuit Judges.

BUFFINGTON, Circuit Judge.

This is a petition for review of a decision of the Board of Tax Appeals. The petitioner's decedent traded, through brokers, in stocks and other securities which were handled in margin accounts. The Commissioner, applying the first-in first-out rule, held the taxpayer had not reported in full in 1926 and 1927 the profits made on sales of stock. The taxpayer kept her books on the cash receipts and disbursements basis.

Although several questions were argued before the Board of Tax Appeals, the single one before us is whether the profits were not income to the taxpayer because she did not in fact receive them but allowed them to remain with the brokers for use by them in handling her margin accounts. We think the brokers were her agents and that, when the sales were made at a profit, the receipt of the profit by them amounted to receipt of the profits by the taxpayer. The same question was decided in Webb v. Commissioner (C.C.A.) 67 F.(2d) 859. See, also, Corliss v. Bowers, 281 U.S. 376, 50 S. Ct. 336, 337, 74 L. Ed. 916, where it is held: "The income that is subject to a man's unfettered command and that he is free to enjoy at his own option may be taxed to him as his income, whether he sees fit to enjoy it or not."

The order of the Tax Board is affirmed.