Carroll J. Bellis and Mildred Bellis v. Commissioner of Internal Revenue

OPINION

SPENCER WILLIAMS, District Judge:

Appellants paid $52,000 for 18.18 shares of stock in New Pioneer Club, Inc. (NPC), a Nevada corporation. The transaction took place in California and was the direct result of appellants’ reliance on representations by Norbert Jansen, President of NPC that NPC was a profitable company and a sound investment opportunity. The sale violated California Corporations Code § 25500 which requires a company selling securities of its own issue to obtain a permit from the state corporations commissioner. Sixteen months after the purchase, NPC filed for bankruptcy…