95 F.2d 573 | 3rd Cir. | 1938
This is a petition for review of a decision of the Board of Tax Appeals determining a deficiency in the petitioner’s income tax for 1927. The issue is whether the amount of $598,571.01, the agreed fair market value of certain shares of common stock received by the petitioner, should be included in the petitioner’s taxable income for 1927. The determination of this issue is dependent upon whether the shares were received by the petitioner in 1927 or in some prior year.
During the test period the petitioner and •the producers each delivered more than 10,--000 barrels of oil daily; thus entitling the petitioner to one-half of the 49 per cent, of common stock and the producers to one-half. The- last remaining preferred stock was retired and the escrow was terminated in January, 1927. The petitioner received a certificate for 2,450 shares, free of restrictions in March, 1927; the shares having an agreed fair market value of $598,-571.01. The petitioner did not report any income from the receipt of these shares for 1927 or for any prior year. The Commissioner determined that the petitioner received the shares in 1927.
Section 213 of the Revenue Act of 1926, c. 27, 44 Stat. 9, 23, requires that all items of gross income shall be included for the taxable year in which received by the taxpayer. Stoner v. Commissioner of Internal Revenue, 3 Cir., 79 F.2d 75, certiorari denied Helvering v. Stoner, 296 U.S. 650, 56 S.Ct. 309, 80 L.Ed. 462; Taylor v. Commissioner of Internal Revenue, 7 Cir., 89 F.2d 465; United States v. Safety Car Heating Co., 297 U.S. 88, 95, 56 S.Ct. 353, 356, 80 L.Ed. 500. Until 1927, when the escrow was terminated, the petitioner not only lacked either actual possession or control, but the number of shares to which it would ultimately be entitled was dependent upon future tests and the shares themselves were burdened with restrictions until and if Reagan earned sufficient profits to retire the preferred shares. It is our opinion that the petitioner realized no income pending determination of the true and ultimate ownership and that this did not occur until 1927.
The decision of the Board of Tax Appeals is affirmed.