Rev. Rul. 70-231

The purpose of this Revenue Ruling is to update and restate, under the current statute and regulations, the position set forth in I.T. 1353, C.B. I-1, 150 (1922).

During 1967, the taxpayer, on each of three occasions, purchased 100 shares of stock in the M Corporation. He paid $158 per share for the first block of 100 shares, $100 per share for the second block, and $95 per share for the third block. On December 22, 1969, the taxpayer sold the 300 shares of M stock for $125 per share. On January 8, 1970, the taxpayer purchased 250 shares of identical M stock. The taxpayer is not a dealer in securities.

Section 1091 of the Internal Revenue Code of 1954 provides that in the case of any loss claimed to have been sustained from any sale or other disposition of shares of stock or securities where it appears that, within a period beginning 30 days before the date of the sale or disposition and ending 30 days after that date, the taxpayer has acquired (by purchase or by an exchange on which the entire amount of gain or loss was recognized by law), or has entered into a contract or option so to acquire, substantially identical stock or securities, then no deduction for the loss will be allowed under section 165(c)(2) of the Code; nor will the deduction be allowed a corporation under section 165(a) of the Code unless it is a dealer in stock or securities, and the loss is sustained in a transaction made in the ordinary course of its business.

Section 1.1091-1(c) of the Income Tax Regulations provides, in part, that where the amount of stock or securities acquired within the 61-day period is less than the amount of stock or securities sold or otherwise disposed of, then the particular shares of stock or securities the loss from the sale or other disposition of which is not deductible will be those with which the stock or securities acquired are matched in accordance with the following rule: The stock or securities acquired will be matched in accordance with the order of their acquisition (beginning with the earliest acquisition) with an equal number of the shares of stock or securities sold or otherwise disposed of.

Accordingly, the loss realized upon the sale of the first block of 100 shares of M stock is not deductible in 1969 by the taxpayer in the instant case since within 30 days after the date of sale, 250 shares of M stock were acquired by him. Furthermore, the loss in respect of the first block of stock does not reduce the gain realized upon the sale of the second and third blocks of stock.

I. T. 1353 is superseded, since the position set forth therein is restated under current law in this Revenue Ruling.

¹ Prepared pursuant to Rev. Proc. 67-6, C.B. 1967-1, 576.