OPINION.
TRAMmell:
These are consolidated proceedings for the redeter-mination of deficiencies in income tax for the year 1930 as follows:
[[Image here]]
The sole issue in this case relates to the basic date for determination of the profit derived by the petitioners from the sales of certain corporate stocks during the year 1930. The facts were stipulated by the parties, and their stipulation is by reference here adopted in full as our findings of fact. Only so much of the stipulation as is deemed essential to a discussion of the issue is set out hereinbelow.
Charles R. Huntley died testate, a resident of the city of Buffalo, Erie County, New York, on September 27, 1926. The petitioners in Docket Nos. 69214 and 69215 are the duly qualified trustees under the last will and testament of the, decedent, and the petitioner in Docket No. 69216 is a son of the decedent.
On May 22,1929, the Surrogate of Erie County, New York, issued a decree judicially settling the intermediate accounts of the executors [932]*932of the decedent’s estate, and ordering a partial distribution of the assets. The decree in material part reads as follows:
It Is Further Ordered, Adjudged and Degreed, that said Executors make a partial distribution of the securities and property, remaining in their hands and transfer and deliver the same as follows:
To William R. Huntley
*******
500 Shs. Amer. Superpower Corp. Class B. Com-$48,000.00
*******
To William R. Huntley and Manufacturers & Traders-Peoeles Trust Company, as Trustees fob Robebt R. Huntley
*******
1250 Shs. Bflo. Niag. & East. Pr. Corp. Class A_ 79,843.75
*******
To William R. Huntley and Manufactubees & Tbadees-Peoples Trust Company, as Trustees fob Mary Huntley Green
*******
1250 Shs. Bflo. Niag. & East. Pr. Corp. Class A- 79,843. 75
It Is Further Obdebed, Adjudged and Deoeebd that the proper officers, registrars and transfer agents of the respective corporations by whom said stocks and bonds were issued be and they hereby are directed upon the presentation to them of the stock certificates and/or bonds duly endorsed and a duly certified copy of this decree to make transfer of the stock represented by said certificates and of said bonds as hereinabove directed;
*******
It Is Furtheb Obdebed, Adjudged and Decreed Upon filing in this Court receipts showing the distribution, transfer and delivery of the moneys and property as hereinabove directed, that the executors be and they hereby are discharged of any further liability and accountability as to all things determined by this decree;
It Is Fubtheb Obdebed, Adjudged and Decreed, that after making the payments and transfers hereinabove directed to be made, the balance of the moneys and property in their hands be retained by the Executors and administered in accordance with the terms of the Last Will and Testament of Charles R. Huntley, Deceased.
Pursuant to the surrogate’s decree the executors proceeded to have the securities transferred on the books of the respective corporations to, and new stock certificates issued in the names of, the several legatees entitled to receive them.
Thereafter, on June 20, 1929, the executors delivered to the trustee for Robert R. Huntley a certificate for 1,250 shares of class A stock of the Buffalo, Niagara & Eastern Power Corporation, which certificate was, on August 19, 1929, exchanged by the trustees for 5,000 shares of common stock of Niagara Hudson Power Corporation. The latter stock was sold by the trustees on May 12, 1930.
On June 20, 1929, the executors also delivered to the trustees for Mary Huntley Green a certificate for 1,250 shares of class A stock of the Buffalo, Niagara & Eastern Power Corporation, which certifi[933]*933'cate was, on August 19, 1929, exchanged by the trustee for 5,000 shares of Niagara Hudson Power Corporation common stock, and the latter stock was sold by the trustees on May 12, 1930.
On July 12, 1929, the executors delivered to petitioner William R. Huntley a certificate for 2,500 shares of the new common stock of the American Superpower Corporation, which certificate had been received by the executors on June 14,1929, in exchange for the original 500 shares of class B common stock of this corporation, referred to in the decree of distribution. William R. Huntley sold the 2,500 shares of new common stock on October 14, 1930.
The class A stock of the Buffalo, Niagara & Eastern Power Corporation had a fair market value of 61 % on May 22, 1929, and the same stock had a fair market value of 99% on June 20, 1929. The class B common stock of the American Superpower Corporation had a fair market value on May 22, 1929, of 163%, and the new common stock of this corporation had a fair market value on June 14, 1929, of 41% and on July 12,1929, of 64%.
In determining the deficiencies in controversy, respondent used as the basis for computing the profit derived by the petitioners from the sales of stock in 1930 the fair market value of the stocks on the date of the decree of distribution, while the petitioners contend that the proper basis is the fair market value at the dates on which the stock certificates were actually delivered to them by the executors.
The pertinent provisions of the Revenue Act of 1928, embodied in section 113 (a) (5), are set out in the margin.1
Under the prior acts the basis for computing gain or loss on the sale of corporate securities received from a decedent was the fail-market value of such property “at the time of acquisition.” The 1928 Act effected a change in the law and provided that the basis for determining gain or loss upon the sale of personal property acquired by general bequest, as in the present case, shall be the fair market value of the property “ at the time of the distribution to the taxpayer.” Brewster v. Gage, 280 U.S. 327.
The parties here agree that the basis for determining the gain derived from the sales of stocks in 1930 is the fair market value “ at [934]*934the time of the distribution. ” to them, but they disagree as to what date or dates constitute “the time of the distribution.” Thus, the issue presented involves a construction of the phrase “ time of the distribution to the taxpayer.” In other words, under the facts of this case, when were the stocks in question distributed to the petitioners within the meaning of the statute? Was “the time of the distribution ” the date on which the surrogate by his decree ordered distribution to be made, as urged by the respondent, or the dates on which the stock certificates were actually delivered to the respective dis-tribúteos by the executors, as contended by the petitioners ?
Substantially the same question was considered by us in Arthur E. Braun, Trustee, 29 B.T.A. 1161.
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OPINION.
TRAMmell:
These are consolidated proceedings for the redeter-mination of deficiencies in income tax for the year 1930 as follows:
[[Image here]]
The sole issue in this case relates to the basic date for determination of the profit derived by the petitioners from the sales of certain corporate stocks during the year 1930. The facts were stipulated by the parties, and their stipulation is by reference here adopted in full as our findings of fact. Only so much of the stipulation as is deemed essential to a discussion of the issue is set out hereinbelow.
Charles R. Huntley died testate, a resident of the city of Buffalo, Erie County, New York, on September 27, 1926. The petitioners in Docket Nos. 69214 and 69215 are the duly qualified trustees under the last will and testament of the, decedent, and the petitioner in Docket No. 69216 is a son of the decedent.
On May 22,1929, the Surrogate of Erie County, New York, issued a decree judicially settling the intermediate accounts of the executors [932]*932of the decedent’s estate, and ordering a partial distribution of the assets. The decree in material part reads as follows:
It Is Further Ordered, Adjudged and Degreed, that said Executors make a partial distribution of the securities and property, remaining in their hands and transfer and deliver the same as follows:
To William R. Huntley
*******
500 Shs. Amer. Superpower Corp. Class B. Com-$48,000.00
*******
To William R. Huntley and Manufacturers & Traders-Peoeles Trust Company, as Trustees fob Robebt R. Huntley
*******
1250 Shs. Bflo. Niag. & East. Pr. Corp. Class A_ 79,843.75
*******
To William R. Huntley and Manufactubees & Tbadees-Peoples Trust Company, as Trustees fob Mary Huntley Green
*******
1250 Shs. Bflo. Niag. & East. Pr. Corp. Class A- 79,843. 75
It Is Further Obdebed, Adjudged and Deoeebd that the proper officers, registrars and transfer agents of the respective corporations by whom said stocks and bonds were issued be and they hereby are directed upon the presentation to them of the stock certificates and/or bonds duly endorsed and a duly certified copy of this decree to make transfer of the stock represented by said certificates and of said bonds as hereinabove directed;
*******
It Is Furtheb Obdebed, Adjudged and Decreed Upon filing in this Court receipts showing the distribution, transfer and delivery of the moneys and property as hereinabove directed, that the executors be and they hereby are discharged of any further liability and accountability as to all things determined by this decree;
It Is Fubtheb Obdebed, Adjudged and Decreed, that after making the payments and transfers hereinabove directed to be made, the balance of the moneys and property in their hands be retained by the Executors and administered in accordance with the terms of the Last Will and Testament of Charles R. Huntley, Deceased.
Pursuant to the surrogate’s decree the executors proceeded to have the securities transferred on the books of the respective corporations to, and new stock certificates issued in the names of, the several legatees entitled to receive them.
Thereafter, on June 20, 1929, the executors delivered to the trustee for Robert R. Huntley a certificate for 1,250 shares of class A stock of the Buffalo, Niagara & Eastern Power Corporation, which certificate was, on August 19, 1929, exchanged by the trustees for 5,000 shares of common stock of Niagara Hudson Power Corporation. The latter stock was sold by the trustees on May 12, 1930.
On June 20, 1929, the executors also delivered to the trustees for Mary Huntley Green a certificate for 1,250 shares of class A stock of the Buffalo, Niagara & Eastern Power Corporation, which certifi[933]*933'cate was, on August 19, 1929, exchanged by the trustee for 5,000 shares of Niagara Hudson Power Corporation common stock, and the latter stock was sold by the trustees on May 12, 1930.
On July 12, 1929, the executors delivered to petitioner William R. Huntley a certificate for 2,500 shares of the new common stock of the American Superpower Corporation, which certificate had been received by the executors on June 14,1929, in exchange for the original 500 shares of class B common stock of this corporation, referred to in the decree of distribution. William R. Huntley sold the 2,500 shares of new common stock on October 14, 1930.
The class A stock of the Buffalo, Niagara & Eastern Power Corporation had a fair market value of 61 % on May 22, 1929, and the same stock had a fair market value of 99% on June 20, 1929. The class B common stock of the American Superpower Corporation had a fair market value on May 22, 1929, of 163%, and the new common stock of this corporation had a fair market value on June 14, 1929, of 41% and on July 12,1929, of 64%.
In determining the deficiencies in controversy, respondent used as the basis for computing the profit derived by the petitioners from the sales of stock in 1930 the fair market value of the stocks on the date of the decree of distribution, while the petitioners contend that the proper basis is the fair market value at the dates on which the stock certificates were actually delivered to them by the executors.
The pertinent provisions of the Revenue Act of 1928, embodied in section 113 (a) (5), are set out in the margin.1
Under the prior acts the basis for computing gain or loss on the sale of corporate securities received from a decedent was the fail-market value of such property “at the time of acquisition.” The 1928 Act effected a change in the law and provided that the basis for determining gain or loss upon the sale of personal property acquired by general bequest, as in the present case, shall be the fair market value of the property “ at the time of the distribution to the taxpayer.” Brewster v. Gage, 280 U.S. 327.
The parties here agree that the basis for determining the gain derived from the sales of stocks in 1930 is the fair market value “ at [934]*934the time of the distribution. ” to them, but they disagree as to what date or dates constitute “the time of the distribution.” Thus, the issue presented involves a construction of the phrase “ time of the distribution to the taxpayer.” In other words, under the facts of this case, when were the stocks in question distributed to the petitioners within the meaning of the statute? Was “the time of the distribution ” the date on which the surrogate by his decree ordered distribution to be made, as urged by the respondent, or the dates on which the stock certificates were actually delivered to the respective dis-tribúteos by the executors, as contended by the petitioners ?
Substantially the same question was considered by us in Arthur E. Braun, Trustee, 29 B.T.A. 1161. In that case the Orphans’ Court entered a decree in 1925 and another in 1927, in each of which it was directed that certain shares of stock be distributed to the trustees at a future date. The certificates of stock were not actually delivered to the distributees until subsequent to the dates on which distribution was ordered by the decrees. Two lots of stock were sold in 1928. We held in that situation that “ the time of the distribution to the taxpayer ”, under the statute hereinabove referred to, was. neither the dates on which the decrees were entered nor the dates on which the stock certificates were actually delivered to the distributees, but the effective dates of the decrees, that is, the dates on which distribution was directed to be made by the decrees. In our opinion we said:
As we construe these decrees, they directed in effect that distribution be made at a future date, upon the happening of specified events, and until those events transpired, the decrees by their terms were not operative to effect distribution. * * *
The dates on which the executors in this case delivered actual possession of the stock to the trustees, we think, are immaterial. The dates on which the decrees directed distribution constituted the “ time of the distribution to the taxpayer” within the meaning of section 113 (a)(5), supra, and the fair market, value of the stock on those respective dates is the basis provided for determining gain or loss.
The same rule, in our opinion, must be applied in the instant case. Here the. surrogate’s decree did not direct distribution to be made at a future date, but the executors were ordered to make distribution without limitation as to time, and hence they were authorized to distribute immediately after the signing and entry of the decree. The effective date of the decree was, therefore, May 22, 1929. On and after that date the respective petitioners were the owners of the shares of stock set aside and distributed to them by the decree. Any increase in the value of the stocks thereafter would inure exclusively to their benefit, and they alone would suffer loss resulting from any decline in the value after that date.
[935]*935A certificate of stock merely evidences ownership, it is not the stock itself. If certificates representing the shares of stock distributed to these petitioners had never been delivered to them by the executors, they would nevertheless have been the owners of interests in the respective corporations from May 22, 1929. Therefore, the dates on which the stock certificates were actually delivered to the petitioners are not the dates on which they became the owners of the property or interest rights in the corporations; they became owners of such property rights on the effective date of the decree of distribution, namely, May 22, 1929.
Plainly, we think, to adopt the contention of the petitioners that “ the time of the distribution ” is the date on which actual delivery is made would throw open the door to tax evasion and lead to results not contemplated by Congress in adopting the statute in question. In such event, any taxpayer in the position of these petitioners could obtain an increased basis for computing profit or loss by merely deferring acceptance of possession of the stock ; certificates on a rising market where the value of the stock was increasing.
This is well illustrated by the instant case. The surrogate’s decree of May 22, 1929, directed distribution to petitioner Huntley of 500 shares of class B common stock of the American Superpower Corporation, then having a fair market value of 163%. On June 14 the executors received a certificate for 2,500 shares of the new common stock, made out in Huntley’s name, in exchange for the original 500 shares of class B common. Yet the certificate for the new stock was not delivered to the petitioner until July 12, 1929. The market price of the stock was increasing rapidly. The new stock had a fair market value of 41% on June 14, but its value had increased to 64% on July 12, when actual delivery of the certificate was made, thus affording the petitioner a materially increased basis for computing profit on a subsequent sale, if value at the date of actual delivery of the certificate be taken as a basis.
We do not think that Congress intended by the quoted statute to permit a taxpayer to fix the basis for determining profit or loss by merely accepting possession immediately in the case of a falling market or deferring acceptance of the stock certificates where the market is rising.
On authority of our decision in the Braun, case, supra, we hold that the basis for determining gain or loss on the sales of the stocks here involved is the fair market value of the stocks at May 22, 1929, the effective date of the decree of distribution.
Reviewed by the Board.
Judgment will be entered under Bule 50.