MCUNT v. COMMISSIONER ( 1929 )

EDWARD H. MCUNT, CLARENCE J. HAND, ATTORNEY IN FACT, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

MCUNT v. COMMISSIONER

Docket No. 21627.

United States Board of Tax Appeals

16 B.T.A. 847; 1929 BTA LEXIS 2510;

May 31, 1929, Promulgated

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The transfer of properties to a corporation for its capital stock constitutes an exchange of "property for other property" within the meaning of section 202(b) of the Revenue Act of 1918, and any gain derived therefrom is subject to tax.

Clarence J. Hand, Esq., for the petitioner.

Brooks Fullerton, Esq., for the respondent.

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MORRIS

This proceeding is for the redetermination of a deficiency in income tax of $38,080.77 for the taxable year 1920, and the only error urged for consideration is whether the respondent erred in holding that a transfer of real and personal property made by the petitioner and his brother on or about January 9, 1920, to the Clem Realty Co., Inc., was a transfer of property for stock and a "closed transaction" subject to tax.

FINDINGS OF FACT.

The Clem Realty Co., Inc., hereafter referred to as the Company, was organized and incorporated under the laws of the Stae of New York in January, 1920, and its certificate of incorporation, dated January 6, 1920, signed by the petitioner, his brother Harold K. Mount, and Clarence J. Hand, provides in part as follows:

That the amount of capital with which the said corporation will carry on business is Twelve Hundred ($1,200) Dollars.

That the names and Post Office addresses of the subscribers, and the certificates and number of shares of stock which each agrees to take in said corporation are as follows:

Edward H. Mount, Lake Mahopack, N.Y., four shares.

Harold K. Mount, Wykygil, New Rochelle, four shares.

Clarence J. Hand, 326 Lincoln Avenue, Orange, N.J., four shares.

Said corporation shall be, and is hereby authorized to purchase, acquire, hold and dispose of stocks, bonds, and other evidences of indebtedness of any corporation, domestic or foreign, and issue in exchange therefor its stocks, bonds, or other obligations.

The minutes of the stockholders' meeting of January 9, 1920, contained the following:

The chairman announced that the certificate of incorporation of the company was filed in the office of the Secretary of State at Albany, and check for organization tax sent to the State Treasurer. The chairman further announced that all subscriptions to stock had been paid in full. The chairman then directed that a duplicate original of the certificate of incorporation be annexed to the minutes.

At the first meeting of the board of directors of the company, held on January 9, 1920, Harold K. Mount was elected president, the petitioner, vice president and treasurer, and Clarence J. Hand, vice president and secretary. The pertinent minutes of that meeting read as follows:

The President then announced that the entire capital stock of the company, consisting of twelve shares of no par value had been issued, and paid for in cash at the rate of $100 per share, and that the Treasurer was in possession of said funds.

A resolution was thereupon unanimously adopted providing that the principal place of business of the company should be 159 Remsen St., Brooklyn, N.Y.

The President announced that he and his brother, Edward H. Mount, were prepared to transfer to the corporation the following properties:

288 East Broadway, 143 Division St., 246 Division St., 174 Essex St., 237-41 West 21st St., 526-8 Eighth Avenue, 416 Third Ave., 214 East 21st St., 237 West 46th St., 239-41 West 46th St., 1357-63 Second Ave., 1775-9 Madison Ave., 2112-4 Eighth Ave., 117th St. & Park Ave., 412-4 West 37th St., 331-7 West 44th St., and 1699 Broadway, all in the City of New York, and property at Freeport, L.I., all of which properties they had received by inheritance on or about May 21st, 1917, from Susan Mount, and in which they each had an undivided one-half interest. He further stated that they were prepared to transfer said properties to the corporation at the values at which they had been appraised in transfer inheritance tax proceedings in the Estate of Susan Mount although he believed that several of the properties had materially enhanced in value.

Mr. Hand stated that he was willing to vote that the corporation take the properties over at the price mentioned if a proper method of financing the transaction could be found. That he did not however feel that the capital of the company was sufficient to permit of a fixed or funded debt in an amount sufficient to handle the transaction in that way, and that he was not prepared to personally subscribe any further funds. He further called the directors attention to the fact that several of the parcels were already mortgaged, and that there were outstanding liens and taxes in a substantial amount. He further stated that a mortgage loan would be expensive, and that the matter had to be carefully handled so that income taxes, and other expenses might not be incurred. Mr. Hand further suggested that it would be best to have all the properties appraised to ascertain the present values, and stated that he thought that Mr. Jos. M. Adrian, being familiar with the properties would be a suitable person to act as appraiser.

The President stated that Harold K. Mount and Edward H. Mount desired to make the following proposition to the company:

That subject to existing outstanding mortgages, liens and taxes the Messers Mount would transfer the following properties to the company, namely

288 E. Broadway, 143 Division St., 246 Division St., 174 Essex St., 237-41 West 21st St., 526-8 Eighth Ave., 416 Third Ave., 214 East 21st St., 227 West 46th St., 901 Broadway, 239-41 West 46th St., 1357-63 Second Ave., 1775-9 Madison Ave., 2112-4 Eighth Ave., 117th St & Park Ave., 412-4 West 37th St. 331-7 West 44th St., and 1699 Broadway, all in the City of New York, and property at Freeport, L.I.

That all of said properties, excepting 901 Broadway, New York, should be received by the Company at the value at which they had been appraised in inheritance tax proceedings in the Estate of Susan Mount, and the property, 901 Broadway, at the price at which it had been acquired by Edward H Mount, plus cost of improvements; that if upon an appraisal any of said properties should be found to be of greater value than said prices the excess value of said properties, if any, should be received by the company as a gift from the Messers Mount.

That the corporation should undertake to deliver to said Edward H. and Harold K. Mount, respectively, fifty per cent of its total authorized and outstanding capital stock forthwith. That said Harold K. Mount and Edward H. Mount would further undertake to provide the corporation with approximately $100,000. working capital, or such amount up to $100,000. as might be realized from the sale of stocks received by them from the Estate of Susan Mount, upon the liquidation of outstanding collateral loans, the corporation to have the right from time to time to take up any or all of said stocks at the values at which they were appraised in inheritance tax proceedings, the excess value, if any, to be received as a gift.

That the corporation on its part should further undertake to assume the obligations of Edward H. and Harold K. Mount, incurred or to be incurred by them on behalf of the Bronx Exposition Inc., and to save them harmless from any liability incurred as makers or endorsers on negotiable paper or obligations issued for the accommodation of the Bronx Exposition Inc.

Mr. Hand stated that he was willing to surrender his stock in the company for what he had paid for it, not desiring to obstruct the proposed plan.

The following resolution was thereupon duly proposed, seconded, and unanimously carried:

RESOLVED, that the corporation undertake to forthwith procure the transfer to Edward H. and Harold K. Mount, respectively, of fifty per cent of its authorized and outstanding stock, namely six shares to Edward H. Mount, and six shares to Harold K. Mount. And be it further

RESOLVED that the corporation undertake to save said Edward H. and Harold K. Mount, harmless from any liability incurred by them as makers or endorsers on negotiable paper, or other obligations or contracts, of the Bronx Exposition Inc., by agreement or otherwise, but that it shall be subordinated to all rights of the said Messers Mount against said Bronx Exposition Inc., but shall not be deemed to be answerable directly to said Bronx Exposition Inc., for any obligation of said Messers Mount, or by reason hereof to have assumed any contractual relationship whatsoever with said Bronx Exposition Inc.

PROVIDED, however, that the Messers Mount forthwith procure to be transferred to the corporation, subject to existing outstanding mortgages, liens and taxes, the following properties:

288 East Broadway, 143 Division St., 246 Division St., 174 Essex St., 237-41 West 21st St., 526-8 Eighth Ave., 416 Third Ave., 214 East 21st St., 227 West 46th St., 901 Broadway, 239-41 West 46th St., 1357-63 Second Ave., 1775-9 Madison Ave., 2112-4 Eighth Ave., 117th St. & Park Ave., 412-4 West 37th St., 331-7 West 44th St., and 1699 Broadway, all in the City of New York; and property at Freeport, L.I., on the distinct understanding and agreement that the corporation shall take said properties, at the values at which said properties were appraised in inheritance tax proceedings in the Estate of Susan Mount; and further, Provided, that Edward H. Mount, forthwith transfer to the corporation, subject to existing mortgages, liens and taxes the property 901 Broadway, New York, at its cost to him; and further

PROVIDED that the Messrs Mount agree to supply the corporation with approximately $100,000 working capital, or such amount up to $100,000 as shall be realized from the sale of stocks received by them by inheritance from Susan Mount upon the liquidation of outstanding collateral loans, the corporation to have the right to take any or all of said securities up from time to time at the values at which they were appraised in inheritance tax proceedings. And further

PROVIDED that the corporation shall receive as a gift the excess value of said securities, if any, over said appraisal values, and that if upon appraisal the various parcels of real estate shall be in excess of the values fixed in inheritance tax proceedings in the Estate of Susan Mount, the excess value, if any, shall likewise be construed as a gift to the corporation.

The President thanked Mr. Hand, stating that the resolution was satisfactory to the Messrs Mount, and suggested that it would be best to have the transaction immediately completed.

Mr. Hand thereupon presented his stock for transfer, and stated that a proposed deed had been prepared for execution covering the Susan Mount properties, and that he would prepare a deed covering 901 Broadway.

The following motion was duly made, seconded and carried:

RESOLVED that the President be authorized to have the various properties of the corporation appraised as of January 9th, 1920, and that the Company capitalize said properties at such values as might be deemed reasonable by the officers of the Company, upon the completion of said appraisals.

The President requested that Mr. Hand present his bill for legal services and disbursements in the incorporation of the Company, and stated that it would be paid promptly.

No further business appearing the meeting was thereupon declared adjourned.

On January 9, 1920, the entire authorized capitalization of the company was issued:

Certificate No.	Number of shares	Issued to -	For
1	4	Edward H. Mount	$ 400 cash.
2	4	Harold K. Mount	$400 cash.
3	4	Clarence J. Hand	$400 cash.

On the same day and date aforesaid, certificate of stock No. 3 was canceled and certificate No. 4, for two shares, was issued to Edward H. Mount, and certificate No. 5, for two shares, to Harold K. Mount.

By an indenture dated January 9, 1920, the petitioner and his brother and wife conveyed to the company, in consideration of $100 "and other good and valuable consideration," the following parcels of property:

Parcel 1	526 Eighth Avenue.
Parcel 2	2114 Eighth Avenue.
Parcel 3	1775 Madison Avenue.
Parcel 4	Second Ave. and 72d Street.
Parcel 5	237 West 21st Street.
Parcel 6	1779 Madison Avenue.
Parcel 7	1777 Madison Avenue.
Parcel 8	331 West 44th Street.
Parcel 9	333 West 44th Street.
Parcel 10	335 West 44th Street.
Parcel 11	337 West 44th Street.
Parcel 12	214 East 21st Street.
Parcel 13	247 West 21st Street.
Parcel 14	243 West 21st Street.
Parcel 15	239 West 21st Street.
Parcel 16	414 West 37th Street.
Parcel 17	412 West 37th Street.
Parcel 18	246 Division Street.
Parcel 19	227 West 46th Street.

"being the same property conveyed by deed of Richard M. Henry, Referee in Partition, etc. to Charlotte A. and Susan Mount, joint tenants * * *."

The following parcels were also conveyed by the deed aforesaid, they "being the same property conveyed to Susan Mount in an action in partition, Susan Mount v. Charlotte A. Mount, et al, * * *."

Parcel 20	N. E. corner Park Avenue and 117th St.
Parcel 21	Lot 1, Block 1645, Park Avenue.
Parcel 22	1699 Broadway.
Parcel 23	239 West 46th Street.
Parcel 24	241 West 46th Street.
Parcel 25	416 Third Avenue.
Parcel 26	528 Eighth Avenue.
Parcel 27	174 Essex Street.
Parcel 28	143 Division Street.

All of the foregoing parcels of land are the same premises acquired by the petitioner and his brother by inheritance from Susan Mount on May 21, 1917.

By another indenture dated January 19, 1920, the petitioner conveyed to the company, in consideration of $10 "and other good and valuable consideration," the premises known and described as 901 Broadway, City, County and State of New York, "being the same property conveyed by Millie C. Bragdon and another to the party of the first part [Edward H. Mount] by deed dated April 2, 1914, * * *" subject to a mortgage of $100,000.

Each of the two deeds aforesaid bore the endorsement "Not Subject to Recording Tax May 18, 1920."

There was attached to the petitioner's income-tax return for 1920 a note reading "Affiant has no rents to return as he and his brother Harold K. Mount conveyed all of their realty in January 1920, to the Clem Realty Company, Inc. and received in return for said conveyance the entire capital stock of said Company. Affiant has therefore received no income from said property except in the form of dividends from said Clem Realty Company, Inc."

In addition to the realty which the petitioner and his brother acquired by inheritance they also acquired 538 shares of capital stock of the Mechanics & Metals National Bank.

At a meeting of the board of directors of the company held on April 8, 1920, the following business was transacted and resolution adopted:

The President called the meeting to order and stated that Harold K. Mount and Edward H. Mount had received a subscription warrant entitling them to purchase 269 shares of stock of the Mechanics & Metals National Bank of the City of New York. That this warrant accrued on stock on which the corporation had an option to purchase at the price at which it had been acquired by the Messrs Mount, namely its value as appraised in inheritance tax proceedings. That the Messrs Mount wished to be advised as to whether the corporation desired to acquire the warrant, the original stock, or both.

After some discussion the following resolution, was proposed, seconded and adopted.

RESOLVED that the corporation take over the subscription warrant for 269 shares of Mechanics & Metals stock and credit the Messrs Mount with same as against the $100,000 working capital which they had agreed to procure. Carried.

The President stated that this arrangement was satisfactory to the Messrs Mount, and asked that a proper resolution be passed providing funds to exercise the warrant. Mr. Hand stated that he had made arrangements to make a loan on the company's behalf at the New York Trust Company for the necessary funds, and presented the following resolution, which had been approved as to form by the Trust Company:

WHEREAS, a proposition has been submitted to this Company for the sale to it of a subscription warrant, entitling it to subscribe to 269 shares of stock of "The Mechanics' and Metals National Bank of the City of New York" at par; and

WHEREAS, it is deemed advantageous to the Company to avail itself of said proposition:

NOW, THEREFORE, BE IT RESOLVED, That the President of the Company be authorized to enter into the contract submitted for the purchase of said subscription warrant:

AND THAT HE FURTHER BE AUTHORIZED to take all steps in his discretion necessary to acquire said rights and stock, and that he borrow for the account of the Company the sum of Seventy-five thousand ($75,000.) dollars for the purpose of carrying out said transaction, and that he deliver the Company's notes therefor, pledging the said stock when acquired as collateral therefor, or for any part thereof.

On motion duly made, seconded and carried the resolution was unanimously carried.

No further business appearing the meeting was declared adjourned.

On April 9, 1920, the company issued its check for $26,900 for "subscription for 269 shs. Mechanics & Metals Bank stock." On July 6, 1920, the company also expended $975 representing "int to July 8th on $65,000 collateral loan," and on the same day and date it expended $220,220 representing "Amt pd. Guaranty Trust Co. to take up debt of E. H. Mount."

The petitioner reported in his 1920 income-tax return $10,760, representing $20 a share upon 538 shares of stock of the Mechanics & Metals Bank for one-half of the year.

On November 22, 1920, the company received from Shonnard, Mills & Co. $12,898.45 "a/c of Mech. & Metals stock 200 shs."; on July 5, 1921, $55,942 representing "Proceeds of sale of 200 shares M. & M. Bk. Stock at 280 less coms."; on July 13, 1921, $1,936.97 on account of the sale of "7 shs M. & M. Bank Stock thru Deg. & Burke 277 less com. & tax"; on the same date $20,797 from the sale of "75 shs of M. & M. Bank stock thru Shonnard, Mills & Co., 25 shs at 278; 50 shs at 277, less com. & tax"; and on the same date $62,259.75 from the sale of "225 shs M. & M. Bank stock thru Deg. & Burke at 277, less com. & tax."

There was attached to the company's income-tax return for 1921 the following note respecting the shares of Mechanics & Metals National Bank stock aforesaid:

The item of $43,825.72 profit on sale of capital assets reported on line 23 page 1, is arrived at as follows: The corporation sold in July, 1921, 507 shares of stock in the Mechanics & Metals National Bank of the City of New York through Degener & Burke, brokers, having an office at 20 Broad Street, City, County and State of New York, for the sum of $140,935.72. 269 shares of this stock were acquired by the corporation in April 1920 at par, namely, at a cost of $26,900 upon the exercise of rights to subscribe for the issuance of new stock and 238 shares were acquired by the company upon its organization. This latter 238 shares are carried by the company at $295 a share being the price at which it was assessed in transfer inheritance tax proceedings in the Estate of Susan Mount, deceased, in May 1917, and at which price it was turned over to the company by Edward H. and Harold K. Mount, the legatees of said Susan Mount. The cost of this stock to the company was therefore $70,210. The total cost of the 507 shares, as above indicated, being $97,110 and the sale price $140,935.72, the profit to the corporation is $43,825.72.

According to the respondent's deficiency notice, the petitioner's net income, as shown in report dated September 2, 1925, was $82,325.50, which amount respondent increased in said deficiency notice by $37,230, for the following reason:

The previous report included the profit on the transfer of this individual's undivided one half interest in certain real estate to the Clem Realty Co. for six shares, no par value stock. There was also included in this transfer a one-half interest in 438 shares Mechanics and Metals Bank stock. This was not included in the previous report and results in an additional profit as follows:

438 shares Mech. and Metals Bank stock acquired from the Estate
of Susan K. Mount on May 20, 1917. Assessed value for inheritance
tax $ 295.00 per share	$129,210.00
Transferred to Clem Realty Co. as at Jan. 1, 1920, Value $465.00
per share	203,670.00
Profit	74,460.00
Taxpayers share 1/2 of the above	37,230.00

OPINION.

MORRIS: In determining whether the transaction entered into between the petitioner and his brother and the Clem Realty Co., Inc., resulted in a taxable profit in 1920, we must determine whether it was an exchange of property for other property within the meaning of section 202 of the Revenue Act of 1918, or, as the petitioner contends, a gift, and therefore resulted in no taxable gain. That section of the Act provides in part:

(a) That for the purpose of ascertaining the gain derived or loss sustained from the sale or other disposition of property, real, personal, or mixed, the basis shall be -

* * *

(b) When property is exchanged for other property, the property received in exchange shall for the purpose of determining gain or loss be treated as the equivalent of cash to the amount of its fair market value, if any; * * *

The respondent's counsel contends that the transaction falls within the purview of that section and article 1566 of Regulations 45 (1920 Edition), and is, therefore, taxable. That article of the regulations provides in part as follows:

Exchange of property and stock. - Where property is transferred to a corporation in exchange for its stock, the exchange constitutes a closed transaction and the former owner of the property realizes a gain or loss if the stock has a market value, and such market value is greater or less than the cost or the fair market value as of March 1, 1913 (if acquired prior thereto), of the property given in exchange.

The petitioner contends that the capital stock of the company was paid for in cash and that the properties in question were transferred to it as a gift. In order to sustain the petitioner, therefore, we must find that there was an intention to make a gift, that a gift was in fact accomplished, and, furthermore, that the element of consideration was wholly absent from the transaction.

At the meeting of the stockholders of January 9, 1920, the chairman "announced that all subscriptions to stock had been paid in full," and at the meeting of the board of directors on the same date the president "announced that the entire capital stock of the company * * * had been issued, and paid for in cash at the rate of $100 per share, * * *." On this subject, Clarence J. Hand, one of the incorporators, who originally held four shares of stock, testified as follows:

Q. You were one of the incorporators, were you not? A. I was.

Q. Did you ever pay any actual cash to Mr. Mount for your four shares?

A. If you mean by that, did I turn over to him currency, no. Q. Did you turn over to him a check? A. No. Q. In what way did you pay for your stock?

A. I signed a subscription blank and I signed the certificate of incorporation, and I was, at all times, in position to turn over the cash.

Q. Did you ever turn over any cash for that stock? A. I did not.

Q. Did Mr. Edward H. Mount ever turn over any cash for the stock?

A. I do not know.

Q. Did you, as secretary, ever have any knowledge of his having turned over any such cash?

A. I had knowledge that Mr. Mount stated in my presence that the twelve shares of stock of the corporation had been paid for, and that the corporation was ready to do business.

Obviously, unless some one else paid the cash for the stock of Hand, which does not appear to be the case, the statements made at the meeting of the stockholders and the board of directors are unfounded in fact. At any rate, this testimony creates in our minds sufficient doubt of the actual payment of cash to require more positive proof on the subject.

The petitioner's counsel points out that it was provided that the company should take all of the properties jointly conveyed by the Messrs. Mount "at the value at which they had been appraised in inheritance tax proceedings in the Estate of Susan Mount, and the property, 901 Broadway, at the price at which it had been acquired by Edward H. Mount, plus cost of improvements; that if upon an appraisal any of said properties should be found to be of greater value than said prices the excess value of said properties, if any, should be received by the company as a gift from the Messrs. Mount." He argues that the conveyances were made pursuant to the offers and acceptances arrived at and consequently fully subject to all of the said terms and conditions, including the expressed provisions, that the excess values, if any, should be construed as a gift to the corporation; that there is no evidence of the transfer on any other basis; that the shares of stock of the company were not salable and the fair market value thereof was at no time in excess of the value of one-half interest in the properties covered by the deed of January 9, 1920, and an entire interest in the 901 Broadway property.

It is well to state at this juncture that no evidence was offered as to the salability of the company's stock or as to the fair market value thereof. Therefore, if the respondent's findings are sustained on the issue presented to us, the values found by him must be approved also.

It appears from the minutes of the board of directors of January 9, 1920, that the petitioner and his brother proposed to transfer the properties in question to the company, and that it was "RESOLVED, that the corporation undertake to forthwith procure the transfer to Edward H. and Harold K. Mount, respectively, of fifty per cent of its authorized and outstanding stock * * *," and that after a further resolution with respect to saving the petitioner and his brother harmless from certain liabilities the same said resolution stated "PROVIDED, however, that the Messrs. Mount forthwith procure to be transferred to the corporation, subject to existing outstanding mortgages, liens and taxes, the following properties: [here listing the properties] on the distinct understanding and agreement that the corporation shall take said properties, at the values at which said properties were appraised in inheritance tax proceedings in the Estate of Susan Mount; and further, Provided, that Edward H. Mount forthwith transfer to the corporation, subject to existing mortgages, liens and taxes the property 901 Broadway, New York, at its cost to him." The aforementioned shares of stock were duly issued on January 9, 1920, and the petitioner and his brother became the sole owners of the company's capital stock. On that same day the petitioner and his brother and wife conveyed the properties in question to the company, exclusive of 901 Broadway, in consideration of $100 "and other good and valuable consideration," and, thereafter, on January 19, 1920, the petitioner conveyed to the company the said 901 Broadway property, pursuant to the provision in the resolution aforesaid, in consideration of $10 "and other good and valuable consideration." The petitioner attached a note to his income-tax return for 1920 stating that he and his brother conveyed all of their realty to the company and that they received in return therefor the entire capital stock of said company.

Although the record does not show, we are satisfied that the properties transferred by the petitioner to the company were of considerable value, and we must, therefore, recognize that the consideration mentioned in the two conveyances to the company was merely nominal, in fact, this was admitted by counsel for the petitioner, who was himself a witness. Since the stated consideration is admittedly nominal, and since the conveyances provided for the payment of "other good and valuable consideration," it was incumbent upon the petitioner to disclose just what constituted this additional consideration, particularly if it did not, in fact, include the stock, but this he did not do.

We are unable to find in the record any evidence of a gift except that which relates to an attempt to make a gift of the excess value over the inheritance-tax values of the properties. It is difficult, if not impossible, to see how this showing can possibly affect the taxable profit to the petitioner. A gift, if it is one in fact, is an unqualified giving up of dominion over the property itself and everything appertaining thereto. Therefore, it is fallacious to say that properties, as in the instant case, passed to the company, and that only a certain portion of the value attached thereto passed by gift. The transaction was either a gift in its entirety or was no gift at all, and mere words of the alleged donor can not possibly affect the value of the properties so given. If the value of the properties can not thus be affected, it must necessarily follow as a corollary that the value of the stock itself, therefore, can not be affected in determining the taxable gain derived from the transaction.

We are of the opinion that the properties conveyed to the company by indentures of January 9 and 19, 1920, were intended to be, and in fact were, a part of the consideration for the capital stock issued to the petitioner and his brother, which brings the case clearly within the principle enunciated in , wherein we held that the transfer by tenants in common of their undivided interests in a number of oil leases to a corporation in exchange for its capital stock resulted in taxable gain under the provisions of section 202 of the Revenue Act of 1918.

With respect to the shares of capital stock of the Mechanics & Metals National Bank about which there is a dispute, we are unable to find from the record sufficient evidence or information upon which to base a satisfactory conclusion. It appears from the record that the petitioner and his brother acquired 538 shares of capital stock of that bank; that at a meeting of the board of directors of the Clem Realty Co., on April 8, 1920, the petitioner and his brother, having received a subscription warrant entitling them to purchase 269 additional shares of the same stock, offered to sell it to the company, which offer the board decided to accept. Beyond this point the recorded facts tell us little or nothing about the transaction. The respondent's deficiency notice states that stock of the Mechanics & Metals National Bank was transferred to the Clem Realty Co. "as at January 1, 1920, value $465.00 per share." No evidence has been offered with respect to the proper values to be used and we can, therefore, offer no comment on the subject. The petitioner's counsel states in his brief that the petitioner did not transfer in January, 1920, a one-half interest in 438 shares of Mechanics & Metals Bank stock, and as to the date we believe he is correct, because it appears that the stock was not in fact offered to the company until at or after the meeting of the board of directors held on April 8, 1920.

At that meeting, it will be observed, the offer was to sell the subscription warrant for 269 shares, together with "the original stock, or both," whereas the resolution as passed by the board provides for the acquisition of the subscription warrant only. We do not know whether the original shares were also transferred by reason of that resolution or not, or whether cash was paid for them when they were transferred, or whether the only consideration was the original issue of capital stock. The testimony of the petitioner's witness, who appeared as attorney in fact, counsel for the petitioner and as his sole witness, does not explain how many shares were actually transferred, notwithstanding that there is quite a difference of opinion between the petitioner and the respondent on this subject. Furthermore, the petition filed by the petitioner nowhere refers to this stock by name. It is true that there is an allegation with respect to the transfer of real and "personal" property, but we have no way of knowing that the reference there is to stock of Mechanics & Metals National Bank. Assuming that it is, the evidence is so vague and indefinite that we can not, as we have already said, reach a satisfactory conclusion with respect thereto, and because of that fact we must sustain the findings of the respondent in that respect also.

Judgment will be entered for the respondent.