## Facts

- E. T. Weir purchased preferred stock of the Bellefield Company in multiple lots during 1925 and 1926.
- Bellefield owned hotels and apartment buildings in Pittsburgh, including the building where Weir lived as a tenant.
- Weir’s stated reason for acquiring the stock was to have a voice in management to “maintain certain standards” in the building.
- On December 16, 1932, Weir sold the stock through his broker and claimed a loss deduction on his 1932 federal income tax return.
- On March 1, 1933, Weir repurchased the identical shares through his broker; during the interval, an acquaintance (Falk) held the shares.
- Weir explained that he sold after deciding to move out due to high rent, and repurchased after deciding to remain when rent was reduced.
- The Commissioner disallowed the loss deduction and challenged the sale as lacking good faith before the Board of Tax Appeals.
- The Board rejected the Commissioner’s lack-of-good-faith theory but, on its own initiative, denied the deduction on the ground that the stock transaction was not “entered into for profit” under § 23(e)(2) of the Revenue Act of 1932.

## Issues

1. Whether Weir’s loss on the 1932 sale of Bellefield preferred stock was “incurred in any transaction entered into for profit” under § 23(e)(2) of the Revenue Act of 1932.
2. Whether a taxpayer’s significant personal motive (influencing management of a building where he lived) prevents stock ownership from qualifying as a profit-motivated transaction for loss-deduction purposes.

## Decision

- The Third Circuit reversed the Board of Tax Appeals.
- The court held the stock investment was a “transaction entered into for profit” within § 23(e)(2).
- The court allowed Weir’s claimed loss deduction.
- The court emphasized the record supported the bona fides of the sale and repurchase through regular brokerage channels and rejected any sham characterization.

## Legal Principles

- For non-business losses under § 23(e)(2), whether a transaction is “entered into for profit” is evaluated in terms of the taxpayer’s profit intent (state of mind) as shown by the circumstances.
- A transaction can satisfy the “for profit” requirement even if the taxpayer also has substantial personal or non-pecuniary motives; the statute does not require an exclusively pecuniary motive.
- Ownership and trading of corporate stock, an asset ordinarily held for income or appreciation, generally retains its profit character absent evidence that profit expectation was lacking.
- Where the taxing authority’s challenge to the good faith of the sale fails and the transaction is carried out in ordinary market form, the loss is not denied on the basis of motive alone.

## Conclusion

The court held that Weir’s bona fide stock sale produced a deductible loss because the investment qualified as a transaction entered into for profit, notwithstanding his concurrent personal objective of influencing apartment-building management.


Weir v. Commissioner, 109 F.2d 996 (3d Cir. 1940)