majority">

*1239OPINION.

Smith:

The taxpayers claim the right to report their profits in respect of the sale of 1,800 shares of stock of Olympic Amusement Co. by Antonoplos Brothers in 1920 on an installment basis. Their

*1240claim is predicated on article 42 of Regulations 45. It is untenable, however, in view of the provisions of sections 212 (d) and 1208 of1 the Revenue Act of 1926. The former provides:

See. 212. ⅜ ⅜ ⅜ (d) Under regulations prescribed by the Commissioner with the approval of the Secretary, a person who regularly sells or otherwise disposes of personal property on the installment plan may return as income therefrom in any taxable year that proportion of the installment payments actually received in that year which the total profit realized or to be realized when the payment is completed, bears to the total contract price. In the case (1) of a casual sale or other casual disposition of personal property for a price exceeding $1,000, or (2) of a , sale or other disposition of real property, if in either case the initial payments do.not exceed one-fourth of the purchase price, the income may, under regulations prescribed by the Commissioner with the approval of the Secretary, be returned on the basis and in the manner above prescribed in this subdivision. As used in this subdivision the term “ initial payments ” means the payments received in cash or property other than evidences of indebtedness of the purchaser during the taxable period in which the sale or other disposition is made. [For retroactive application of this provision see Section 1208.]

Section 1208 provides that section 212 (d) shall be retroactively applied in computing income under the provisions of the Revenue Act of 1916, the Revenue Act of 1917, the Revenue Act of 1918, the Revenue Act of 1921, or the Revenue Act of 1924, or any of such acts as amended.' ' It will be noted, however, that the payments made by the purchasers of the 1,800 shares of stock of Olympic Amusement Co. during the year 1920 were in excess of 25 per cent of the total purchase price. The taxpayers are not entitled to make returns of income in respect of this transaction upon an installment basis.

What was the amount of profit realized by Antonoplos Brothers from the sale of 1,800 shares of stock in the Olympic Amusement Co. to John Eichleay Jr. Co. ? The cost of these shares was $170,000. The sales price was $225,000. Up to September 10, 1920, Antonoplos Brothers had received $100,000 cash and on that date they received $15,000 additional cash and a note for $140,000, which note was secured by collateral. The Commissioner has made his determination of a deficiency upon the basis that the note had a cash value of $140,000. We think that it had no such value. Antonoplos Brothers attempted to discount it but could not,even obtain a loan upon it. There is some evidence that the collateral was worth par and no more. This would indicate that the collateral behind the note'had a value equal to $100,000. On the note $15,000 was paid prior to December 31, 1920. Based upon a value for the note of $100,000 the consideration received by Antonoplos Brothers during 1920 amounted to $215,000. The determination of a deficiency should be made upon the basis that the profit realized by Antonoplos Brothers *1241during the year 1920, in respect of the sale of the shares of stock, was $45,000.

Order of redetermination will be entered on 15 days1 notice, under Rule 50.

Citation profile

How this case has been treated — in progress