Cook v. Commissioner

5 B.T.A. 111, 1926 BTA LEXIS 2950

Opinion

OPINION.

Lansdon:

Some controversy over the number of shares of stock of the corporation owned by the wife of the taxpayer developed at the hearing. Since the record discloses that the wife filed no separate return, this is not material. The dividends received from the 175 shares of stock owned by the taxpayer and his wife constituted a single item of income for each of the years in which they were paid and were taxable at rates as provided by law for such years, and this is also true of the liquidating dividends realized from the ownership of such stock at the date of dissolution.

The minutes of the corporation dated May 28, 1919, recite that “ the proposition to dissolve the corporation was carried by a unanimous vote of the stockholders and the corporation was purchased by H. G. Cook.” There is no evidence as to whether Cook purchased the assets or the stock, but we conclude that the corporation was dissolved and that Cook, or Cook and his wife, received a liquidating dividend based upon their ownership of 175 shares of stock.

The parties have stipulated that the book value of the stock at March 1,1913, was $194.62 per share. This stock was all closely held and there were no sales indicating a market or a market value at or about the basic date. The taxpayer argues for a value in excess of the figure fixed by the stipulation and bases his contention on a state, ment of earnings for the five years preceding March 1, 1913, but offered no proof to support this claim. ’ The Commissioner used the book value at March 1, 1913, as the basic value in determining the gain from the’ sale of stock. In the absence of any evidence in support of a higher or different value, we have found that the stipulated book value at March 1, 1913, was the fair market value or price of the stock of the American Clothing House at that date.

The Commissioner found that the book value of the stock at the date of dissolution was $213.81 per share. This value was ascertained from the balance sheets of the corporation and is not disputed by the taxpayer. The only evidence that the stock may have had a different value at the date of liquidation is the taxpayer’s purchase of 45 shares from Logan in 1918 at $158.34 a share. We know nothing of the nature or terms of this transaction and do not regard it as determinative of the value of the assets of the corporation more than a year later, as indicated by the balance sheets of the corporation.

At the date of liquidation the taxpayer, or the taxpayer and his wife, owned 130 shares of stock acquired prior to March, 1913. The gain per share resulting from liquidation was $19.19, or a total of $2,494.70. The gain per share on the 45 shares acquired from Logan in 1918 was $55.47, or a total of $2,496.15. It follows, therefore, that the taxpayer or the taxpayer and his wife realized taxable gain from the liquidation of the American Clothing House in the amount of $4,990.85.

Judgment will be entered on 10 days' notice, under Rule 50.