Dupont v. United States

Background

The case involves members of a partnership who traded on the New York Cotton Exchange. On behalf of a customer they bought cotton futures. The customer later instructed that the account be transferred to another broker. To effect the transfer the original brokers delivered a "sold" memorandum to the transferee and received a "bought" memorandum in return. No commission was charged. The original brokers affixed stamp tax stamps to the sold memorandum, sought a refund after refusal, and sued to recover the stamp value.

Reasoning

The question was whether the stamp tax in Section 800 applied to this transfer. The Court explained the transfer was not a "scratch" or "transferred" sale exempted by the statute, because those require same‑day offsetting trades and erasure of an intermediate broker’s name. The Court held the tax is an excise on the privilege of using exchange facilities, so use of the exchange to offset obligations brought the transaction within the statute. The Court also found that, under the exchange’s by‑laws and clearing-house operations, the memoranda created enforceable purchase and sale obligations, so the transfer was treated as an actual sale. For these reasons the Court affirmed the lower court's judgment.

Real world impact

Brokers who transfer customer futures accounts through the exchange will be liable for the stamp tax even when the transfer simply relieves a broker of an account. Using exchange memoranda and clearing-house procedures to shift obligations cannot avoid the tax. The ruling leaves unchanged the exemption for certain same‑day "scratch" transactions that meet the statutory and regulatory requirements.