[580]*580OPINION.
Mellott :
We shall discuss separately the two questions involved. The first is whether a deductible loss occurred in connection with the sale of the stock. Petitioner contends that the above facts show that he sustained a loss in 1928 of $73,333.33 and that such loss is deduct[581]*581ible under section 23 (e) of tbe Revenue Act of 1928. The section relied upon allows as a deduction from gross income “ losses sustained during the taxable year * * * (1) if incurred in trade or business; or (2) if incurred in any transaction entered into for profit, though not connected with the trade or business.”
Petitioner partially states his position by adopting the language of this Board in David Stewart, 17 B. T. A. 604:
Ordinarily, where an individual sells securities to a corporation at less than the cost of the securities, the sale establishes the amount of the individual’s loss for income-tax purposes. It has been shown in this case that the petitioner sold his securities to a corporation for less than those securities cost him. Why, then, should he not have a deduction for a loss?
Respondent does not question the correctness of the above decision, but contends that the transfer of the 5,000 shares of the Journal Co. stock by the petitioner to the International Paper Co. was not a sale for a consideration of $10,000, but was merely a part of, and an incident to complete performance of an “ entire contract ” between petitioner and his associate on the one hand, and the International Paper Co. on the other.
Petitioner argues that the contract is a severable contract and that the consideration for the sale of the stock “ is entirely separate from the consideration for the making of the $1,000,000 loan by the International Paper Company.” He contends that the express language of the contract shows an intention of the parties to make a division and apportionment of the “ consideration ”, and that the price to be paid is to be “ apportioned to each item according to the value thereof and not as one unit.”
Both parties cite the rules laid down in Corpus Juris for determining whether the contract is entire or severable. (13 Corpus Juris, p. 561, et seq.) They agree that ordinarily if the consideration is single the contract is entire; but if the consideration is either expressly or by necessary implication apportioned, the contract will be regarded as severable. Where, however, the portion of the contract to be performed by one party consists of several and distinct items, and the price to be paid is apportioned to each item according to the value thereof and not as one unit in a whole or a part of a round sum, the contract will ordinarily be regarded as severable. This rule applies even though the contract may in a sense be entire, if what is to be paid is clearly and distinctly apportioned to the different items as such, and not to them as part of one whole. (13 Corpus Juris, p. 563, sec. 528.)
The courts have found it very difficult to lay down a rule which will apply in all cases, frequently stating that each case must depend very largely on the terms of the contract involved. This case must [582]*582be so determined, though the testimony may aid us in giving it the proper construction.
Petitioner testified that he was motivated in transferring the shares of stock to the paper company by his agreement to do so. He also stated that he would not have sold them on the open market for $10,000 on the date they were transferred.
Petitioner was a man of means, with a background of legal training and experience of several years as a practicing attorney, and vice president and general manager of a large metropolitan newspaper. This circumstance makes it quite improbable that he would have expended the sum of $83,333.33 in the “ purchase ” of stock and within one week thereafter would have “ sold ” it at a loss of $73,-333.33. We do not mean to infer that such a thing could not happen; but we are concerned with ascertaining whether it did happen in this case.
While petitioner testified that in his opinion the loan would have been made without the sale of the stock to the International Paper Co., such testimony can not vary the ternas of the written contract. The contract is before us and must be construed independently of the petitioner’s conclusion as to what was in the minds of the contracting parties.
The law furnishes certain rules for the construction of written contracts. These rules should so far as possible be applied with consistency and uniformity. The primary rule is that we must, if possible, ascertain and give effect to the mutual intention of the parties so far as that may be done without contravention of legal principles. The intention of the parties is to be deduced from the language employed by them. The contract must be construed as a whole and the intention of the parties must be ascertained from the entire instrument and not from detached portions. (13 Corpus Juris, p. 525, sec. 486; Uinta Tunnel Min. & Tramp. Co. v. Ajax Gold Mining Co., 141 Fed. 563, 566; Cleveland-Cliffs Iron Co. v. East Itasca Mining Co., 146 Fed. 232, 235; United States v. Ansonia Brass & Copper Co., 218 U. S. 452, 467; Green County, Kentucky v. Quinlan, 211 U. S. 582, 594.)
Construing it as a whole, is it entire or severable and divisible? It provided that upon the delivery and payment for the debentures 10,000 shares of stock would be delivered. Manifestly, if the debentures had not been taken by the paper company no correlative obligation would have rested upon petitioner and his associate to deliver the shares of stock and such delivery could not have been compelled by suit or otherwise. This much can be gathered from the face of the contract.
[583]*583If, in tbe construction of the contract, we give consideration to the testimony of the petitioner, the fallacy of his present contention simply becomes more apparent. Under cross-examination, he testified:
Q. The purpose of the entire contract was to secure this financing?
A. That is correct.
Q. And one of the precisions of the contract was that you were to transfer this stock to the International Paper Company, was it not?
A. That is correct.
Another circumstance which points very clearly to the inevitable conclusion that the contract was intended to be entire is the second portion of paragraph No. 8, set out in full in the findings. In that paragraph it is stated that “ as fwther consideration ” the International Paper Co. is to pay the sum of $20,000. The use of the word “ further ”, we believe, clearly indicates that there were other considerations. One of them, obviously, was the purchase of the debentures and the financing of the entire transaction. Clearly, petitioner received for the transfer of the shares in question more than his aliquot part of the $20,000 paid. No testimony was introduced from which we can ascertain the value of such other consideration. We are satisfied it had some value. Gain or loss can not be ascertained unless all factors entering into its computation are proven.
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[580]*580OPINION.
Mellott :
We shall discuss separately the two questions involved. The first is whether a deductible loss occurred in connection with the sale of the stock. Petitioner contends that the above facts show that he sustained a loss in 1928 of $73,333.33 and that such loss is deduct[581]*581ible under section 23 (e) of tbe Revenue Act of 1928. The section relied upon allows as a deduction from gross income “ losses sustained during the taxable year * * * (1) if incurred in trade or business; or (2) if incurred in any transaction entered into for profit, though not connected with the trade or business.”
Petitioner partially states his position by adopting the language of this Board in David Stewart, 17 B. T. A. 604:
Ordinarily, where an individual sells securities to a corporation at less than the cost of the securities, the sale establishes the amount of the individual’s loss for income-tax purposes. It has been shown in this case that the petitioner sold his securities to a corporation for less than those securities cost him. Why, then, should he not have a deduction for a loss?
Respondent does not question the correctness of the above decision, but contends that the transfer of the 5,000 shares of the Journal Co. stock by the petitioner to the International Paper Co. was not a sale for a consideration of $10,000, but was merely a part of, and an incident to complete performance of an “ entire contract ” between petitioner and his associate on the one hand, and the International Paper Co. on the other.
Petitioner argues that the contract is a severable contract and that the consideration for the sale of the stock “ is entirely separate from the consideration for the making of the $1,000,000 loan by the International Paper Company.” He contends that the express language of the contract shows an intention of the parties to make a division and apportionment of the “ consideration ”, and that the price to be paid is to be “ apportioned to each item according to the value thereof and not as one unit.”
Both parties cite the rules laid down in Corpus Juris for determining whether the contract is entire or severable. (13 Corpus Juris, p. 561, et seq.) They agree that ordinarily if the consideration is single the contract is entire; but if the consideration is either expressly or by necessary implication apportioned, the contract will be regarded as severable. Where, however, the portion of the contract to be performed by one party consists of several and distinct items, and the price to be paid is apportioned to each item according to the value thereof and not as one unit in a whole or a part of a round sum, the contract will ordinarily be regarded as severable. This rule applies even though the contract may in a sense be entire, if what is to be paid is clearly and distinctly apportioned to the different items as such, and not to them as part of one whole. (13 Corpus Juris, p. 563, sec. 528.)
The courts have found it very difficult to lay down a rule which will apply in all cases, frequently stating that each case must depend very largely on the terms of the contract involved. This case must [582]*582be so determined, though the testimony may aid us in giving it the proper construction.
Petitioner testified that he was motivated in transferring the shares of stock to the paper company by his agreement to do so. He also stated that he would not have sold them on the open market for $10,000 on the date they were transferred.
Petitioner was a man of means, with a background of legal training and experience of several years as a practicing attorney, and vice president and general manager of a large metropolitan newspaper. This circumstance makes it quite improbable that he would have expended the sum of $83,333.33 in the “ purchase ” of stock and within one week thereafter would have “ sold ” it at a loss of $73,-333.33. We do not mean to infer that such a thing could not happen; but we are concerned with ascertaining whether it did happen in this case.
While petitioner testified that in his opinion the loan would have been made without the sale of the stock to the International Paper Co., such testimony can not vary the ternas of the written contract. The contract is before us and must be construed independently of the petitioner’s conclusion as to what was in the minds of the contracting parties.
The law furnishes certain rules for the construction of written contracts. These rules should so far as possible be applied with consistency and uniformity. The primary rule is that we must, if possible, ascertain and give effect to the mutual intention of the parties so far as that may be done without contravention of legal principles. The intention of the parties is to be deduced from the language employed by them. The contract must be construed as a whole and the intention of the parties must be ascertained from the entire instrument and not from detached portions. (13 Corpus Juris, p. 525, sec. 486; Uinta Tunnel Min. & Tramp. Co. v. Ajax Gold Mining Co., 141 Fed. 563, 566; Cleveland-Cliffs Iron Co. v. East Itasca Mining Co., 146 Fed. 232, 235; United States v. Ansonia Brass & Copper Co., 218 U. S. 452, 467; Green County, Kentucky v. Quinlan, 211 U. S. 582, 594.)
Construing it as a whole, is it entire or severable and divisible? It provided that upon the delivery and payment for the debentures 10,000 shares of stock would be delivered. Manifestly, if the debentures had not been taken by the paper company no correlative obligation would have rested upon petitioner and his associate to deliver the shares of stock and such delivery could not have been compelled by suit or otherwise. This much can be gathered from the face of the contract.
[583]*583If, in tbe construction of the contract, we give consideration to the testimony of the petitioner, the fallacy of his present contention simply becomes more apparent. Under cross-examination, he testified:
Q. The purpose of the entire contract was to secure this financing?
A. That is correct.
Q. And one of the precisions of the contract was that you were to transfer this stock to the International Paper Company, was it not?
A. That is correct.
Another circumstance which points very clearly to the inevitable conclusion that the contract was intended to be entire is the second portion of paragraph No. 8, set out in full in the findings. In that paragraph it is stated that “ as fwther consideration ” the International Paper Co. is to pay the sum of $20,000. The use of the word “ further ”, we believe, clearly indicates that there were other considerations. One of them, obviously, was the purchase of the debentures and the financing of the entire transaction. Clearly, petitioner received for the transfer of the shares in question more than his aliquot part of the $20,000 paid. No testimony was introduced from which we can ascertain the value of such other consideration. We are satisfied it had some value. Gain or loss can not be ascertained unless all factors entering into its computation are proven. The burden of making such proof was upon petitioner.
But the petitioner argues that the consideration for the making of the million dollar loan did not flow from him and his associate, but from the various corporations involved. He contends that they did not pay any price for the loan, that it was not made to them personally, but to the holding company, and that they individually received no part of it. Let us analyze that contention.
The Bryan-Thomason Newspapers, Inc., was not a party to the contract. On the date the contract was executed it was nonexistent. Petitioner and Bryan agreed to form such company and to cause it and other corporations also to be formed by them to do certain acts. They were the owners of all of the stock of the holding company. Their contract made it incumbent upon them — petitioner and Bryan — to deliver to the International Paper Co. the stock here in question, “ upon the delivery of and payment for said debentures.” The purchase of the debentures was contingent upon the delivery of the stock. That such was a fact is plainly shown by the contract; but if there were any doubt about it, petitioner in his testimony has dispelled it.
We therefore hold that the cash received by petitioner was not the sole consideration for the transfer of the stock, and that his loss is [584]*584not the difference between the cost of the stock and the amount of cash so received. It follows that judgment upon this issue should be entered in favor of the respondent.
The next question is whether the petitioner is entitled, under section 23 (b) of the Revenue Act of 1928, to a deduction of the sum of $8,243 as interest paid. This section authorizes the deduction from gross income of “ all interest paid or accrued within the taxable year on indebtedness except ” (exceptions not here important).
Petitioner contends that by giving a new note he paid the old note and the interest thereon. He argues that, if he had gone to a bank or a third party, borrowed the sum of $190,61/1! ($119,400 plus $8,¶&!(3) and had paid his creditor, no question could be raised as to its deduct-ibility. We need not determine the correctness of that contention. We are not concerned with what might have happened, nor need we decide whether, under a different set of circumstances, some other conclusion would be reached. We are concerned with the sole question of whether this taxpayer, on a cash basis, being indebted for principal and accrued interest on a promissory note, having negotiated another loan from his creditor for an amount sufficient to cover the principal and accrued interest on the first loan, is entitled to deduct the amount of interest so adjusted, as interest paid.
Petitioner apparently is not confused by the use of the word “ accrued ” in the revenue act. He recognizes that under the construction which has consistently been followed, interest “ accrued ” can only be deducted when the taxpayer is making his return on an accrual basis, as distinguished from a cash receipts and disbursements basis. Nothing more need be said on this feature.
It is well settled that deductions are only allowed as provided by statute and in order to secure them the taxpayer must bring himself clearly within the terms of the statute. New Colonial Ice Co. v. Commissioner, 292 U. S. 435; Burnet v. Thompson Oil & Gas Co., 283 U. S. 301; Woolford Realty Co. v. Rose, 286 U. S. 319, 326; Ilfeld Co. v. Hernandez, 292 U. S. 62, 66. Petitioner has not done so. We have held, under similar situations, that taxpayers on the cash receipts and disbursements basis may only deduct from their gross income in the taxable year, interest actually paid in that year. Utah Orpheum Co., 3 B. T. A. 1041; Francis R. Hart, 21 B. T. A. 1001.
In Hart v. Commissioner, 54 Fed. (2d) 848, affirming our decision, the Circuit Court of Appeals for the First Circuit, after referring to United States v. Mitchell, 271 U. S. 9, said:
Prom this decision of the Supreme Court, we reach the conclusion that the word “ paid,” as used in the statute refers to cash payments during the taxing year if the taxpayer’s hooks are kept upon the cash receipts and disbursements basis, and that the word “ accrued ” has reference to books or accounts from which returns are made upon the accrual basis.
[585]*585It is inconsistent with the cash receipts ancl disbursements method of accounting that the petitioner be permitted to claim a deduction where there has been, no actual payment of cash. This basis of accounting requires that he report only actual receipts and deduct only actual disbursements.
The fact that the American Trust Company stamped the bill for interest “ paid ” and entered the amount of the petitioner’s note as a credit to interest on its books of account does not establish a cash payment entitling the taxpayer to a deduction for interest paid where his return is on a cash basis. If the note is never paid, the taxpayer has parted with nothing more than his promise to pay. A promise to pay is not cash, and a deduction from [for] interest is permissible only in the taxable year in which the taxpayer pays cash. [Citing cases.]
The question at issue here is closely akin to that involved in Blair v. First Trust & Savings Bank, 39 Fed. (2d) 462, and Helvering v. Martin-Stubblefield, Inc., 71 Fed. (2d) 944, in which the courts held that notes representing commissions received by the taxpayers need not be reported as income. In the latter case the court quoted with approval the language used in Blair v. First Trust & Savings Bank, supra, as follows:
It is plain that until the loan is paid or rediscounted the respondent has earned no profit, but has simply parted with its funds on the faith of the security. The commission is not actually received until respondent gets back what it has previously paid out plus the commission. The deduction of the commission from the face, of the loan .brings nothing into the coffers of the bank.
The taxpayers in the above cited cases did not receive the commissions when the notes were delivered to them. By a parity of reasoning, the petitioner in the instant case did not pay the item of interest in question when he gave his note therefor.
The case of Robert B. Keenan, 20 B. T. A. 498, is cited by petitioner, but we are unable to see that it has any applicability. In that case we held that the payment of expenses with borrowed money did not postpone the deduction of such amount from gross income until the year in which the borrowed money was repaid. The conclusion therein reached is not decisive of the question here under consideration.
In the instant proceeding petitioner substituted one promise to pay for another. In so doing, even though he extinguished his liability under the first note for principal and interest, he “ paid ” nothing in the sense in which this word is used in section 23 (b), supra. After giving the new note, he still owed his creditor the principal and interest due on the old one, and the only change was that his obligation to pay was represented by a new and different piece of paper, the effect of which was to postpone the date of payment. A promise to pay does not satisfy the provisions of the statute allowing a deduction for “ interest paid.” Eckert v. Burnet, 283 U. S. 140.
[586]*586The case of John C. Hermann, 27 B. T. A. 409, in so far as it is contrary to the views herein expressed, is hereby overruled.
It follows, therefore, that petitioner was not entitled to deduct as interest paid, the sum in question.
Eeviewed by the Board.
Judgment upon both issues will be entered in favor of the respondent.