Under the terms of the agreement only the petitioner was liable for any assessment under the consolidated return, and at December 31, 1921, when it took over all the assets of the taxpayer, it became liable at law for all the unpaid obligations of the dissolved corporation. Unless extension by consent had been obtained the period within which such an assessment could be made expired on March 15, 1926. Valid waivers extended the time to December 31, 1927. No assessment was made before that date, but on January 24, 1928, the Commissioner notified the petitioner that it was liable as a transferee for the unpaid income and profits taxes of the taxpayer for the year 1920. The petitioner's liability to assessment as a taxpayer, which it was in fact and in law in the circumstances herein, was tolled at December 31, 1927. In our opinion such liability can. not later be revived by a determination under section 280. See Oswego Falls Corp., 26 B. T. A. 60.

Reviewed by the Board.

Decision will be entered for the petitioner.

ARUNDELL, dissenting: I desire to state briefly the basis of my dissent from the majority opinion. Section 230, Revenue Act of 1918, imposes a tax "upon the net income of every corporation " and the company whose income is in question here is the Kraker Pen Company. Under section 240 of the same act the W. A. Sheaffer Pen Company and the Kraker Pen Company were affiliated and were thus required to file a consolidated return, which they did. A corporation does not cease to be a taxpayer, however, by reason of affiliation. Woolford Realty Co. v. Rose, 286 U. S. 319. The provision in section 240 which permits corporations joining in a consolidated return to agree upon an apportionment of the tax among themselves is purely administrative and is for the convenience of the corporations. Thus, when the Government was advised, pursuant to the statutory provisions, that the Sheaffer Company would pay the Kraker Company's tax, it had a right to look to the Sheaffer Company as the Kraker Company's agent in this matter, as it indeed became. Several years elapsed after the filing of the consolidated return, during which period the tax liability of the Kraker Company was under examination by the Commissioner of Internal Revenue, as a result of which inquiry a deficiency was determined against it. During this period of investigation the Sheaffer Company on several occasions gave the waivers which have been set forth in the majority report. The right of the Sheaffer Company to waive the statutory period of limitations for its principal, the Kraker Company, seems beyond question, and the Government had a perfect right to rely upon those waivers, and in fact did so. Certainly in this proceeding which is directed against the Sheaffer Company as a transferee of

the assets of the Kraker Company, it should not be heard to say that it had no authority to waive the statute in behalf of the Kraker Company. Cf. Lucas v. Hunt, 45 Fed. (2d) 781; Warner Collieries Co. v. United States, 63 Fed. (2d) 34. While thus an agent of the Kraker Company in its income tax matters, the Sheaffer Company took over the assets of the Kraker Company and became a transferee thereof and under the law may be proceeded against as such transferee. The statute allows an extra year within which to proceed against a transferee beyond the period in which assessment may be made against the original taxpayer, and the facts here show that well within that time the present proceedings were initiated.

SMITH and MCMAHON agree with the above dissent.

FRANK P. ROSS, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket Nos. 54116, 63627. Promulgated April 3, 1933.

The owner of a note secured by collateral took no steps prior to or within the taxable year to reduce collateral to ownership and was in possession thereof at the end of such year. Held, that in such circumstances there is no identifiable event to indicate a closed transaction resulting in loss; held, also, that the evidence does not show that the note was worthless in the year in which it was charged off and the amount thereof, less certain credits, deducted from income.

Charles E. Dalrymple, Esq., and Edward R. Burt, Esq., for the petitioner.

Arthur Carnduff, Esq., for the respondent.

OPINION.

LANSDON: The petitioner is an individual, residing at Oak Park. Illinois, where he operates as a capitalist and among other activities in line with his business buys and sells farm mortgages. The respondent has determined deficiencies against him for the years 1928 and 1929, in the respective amounts of $7,482.47 and $1,540.02. For his causes of action he avers (1) that the respondent has erroneously disallowed a deduction from income in 1928 in the amount of $109,444.33 as a loss actually sustained in that year and (2) that the alleged loss resulted in a net business loss in such year which he should be allowed to carry forward and apply against his tax liability for 1929. The two proceedings have been consolidated for hearing and report.

The facts proved at the hearing may be summarized as follows: Some time prior to 1925 petitioner acquired farm mortgages from one Harry B. Alfree of Newton, Iowa, and paid therefor the amount of $311,750 in cash. It later developed that many of such mortgages were of doubtful value and the seller, Alfree, thereupon repurchased them from the petitoner and in settlement gave his promissory note, by the terms of which payments of $10,000 each were to be made on March 1 of the years 1927, 1928 and 1929 and the entire balance on March 1, 1930.

The note which petitioner received as set out herein was collaterally secured by the entire stock issue of a corporation to be organized for the purchase of holding and operating a business building in Newton, which was owned by Alfree but was encumbered by a mortgage in the amount of $60,000 which the said Alfree agreed to pay off and retire. In addition to the stock of such corporation, duly organized as the Newton Improvement Company, which was turned over to the petitioner and which he still holds, petitioner was assigned two insurance policies of $25,000 each on the life of Alfree which had a cash surrender value of $3,081. He still holds such assigned policies and pays the premiums thereon from his own funds. Prior to 1928 petitioner received payments on the note in question in the amount of $15,000. The rental income from the building owned by the Newton Improvement Co. is approximately $25,000 per year, which, by agreement, was to be set apart to apply to payments on the note.

As security for the payment of the $60,000 encumbrance on the building referred to above, Alfree assigned real estate mortgages to petitioner of the total face value of $98,000. Such mortgages to the extent of $33,000 turned out to be worthless and on the remainder only $35,000 has been realized and applied to the encumbrance on the building, leaving a balance of $25,000 due and unpaid at December 3, 1928.

Some time prior to 1928 Alfree had a stroke of paralysis which incapacitated him from business for more than one year. Late in the year 1928 he was indicted for embezzlement but was never tried for the offense charged. In 1928 he owned a home in Newton, worth $40,000 or $50,000, which was mortgaged in the amount of $30,000. He filed a voluntary petition in bankruptcy on December 4, 1930, and was discharged therefrom on July 21, 1931.

In 1928 the petitioner, after assuring himself of the financial and physical condition of Alfree, decided that he could make no further collections on the rote, but took no steps by suit at law or otherwise to convert the collateral to his ownership. In his income tax return for such year he deducted the amount of $109,444.33 from his gross income as a business loss sustained in 1928. He arrived at the amount claimed by subtracting from $311,750 the sum of $163,223.92, $21,000, $3,081.85 and $15,000 which represented respectively the appraised value in that year of the property owned by the Newton Improvement Company, mortgages received from Alfree, cash surrender value of the assigned life insurance policies and payments theretofore received on the note, or a total of $202.305.77. Upon audit the Commissioner disallowed such deduction for the reason that, "since the taxpayer still holds various collaterals taken as security for the note and the amount of the loss is not, as vet, d fi uately established as contemplated by Article 171 of Regulations 74."

A loss is deductible from income in the year in which it is sustained; a bad debt in the year in which it is ascertained to be worth

less. In either event deductibility as to any given year can be proved only by evidence that establishes both the fact and the date of the alleged loss or worthlessness. In this proceeding the petitioner has failed in both respects. In 1928 he still held all the collateral taken in security for the note and had taken no steps to reduce such collateral to ownership and thereby effect a closed transaction as the basis of his claim. Only a small part of the note was due in that year and there is no evidence that the corporation income set apart for that purpose was not sufficient to pay the balance due at the end of the year. It is obvious therefore that there is no basis for the claim that the entire balance due on the note was ascertained to be a worthless debt in 1928. In our opinion the petitioner has failed to show that the amount in controversy should be deducted from his income in the taxable year either as a business loss or a bad debt. Carl Muller, 4 B. T. A. 169; Russo Fruit Co., 23 B. T. A. 1381; R. E. Huff, 20 B. T. A. 516. Cf. Douglas Light & Power Co., 43 Fed. (2d) 904.

The deficiency for 1929 is based upon a net loss claimed in 1928 in the amount of $43,341.83. The effect of our conclusion above is that the petitioner sustained no deductible loss in 1928. It is not necessary therefore to decide whether loss was sustained in a business regularly carried on by the taxpayer.

Decision will be entered for the respondent.

JAMES D. BOONE, PETITIONER, V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

D. W. BOONE, Petitioner, v. COMMISSIONER of Internal Revenue, RESPONDENT.

J. A. BOONE, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

W. F. BOONE, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

ESTATE OF ELI J. TAYLOR, W. L. BURRUSS, ADMINISTRATOR, PETITIONER, V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket Nos. 22760-22763, 37058. Promulgated April 5, 1933.

Benjamin F. Saunders, Esq., C. E. Mahan, Esq., and Edward M. Woolf, Esq., for the petitioners.

Arthur Clark, Esq., and Elden McFarland, Esq., for the respondent.

In these proceedings, which were consolidated for hearing, we are asked to redetermine the following deficiencies for the year 1920:

James D. Boone--

D. W. Boone___.

J. A. Boone__.

W. F. Boone__

W. L. Burruss, Administrator of the Estate of Eli J.
Taylor__

$85, 081.37

37, 087.54

86, 521. 68

145, 245. 64

22, 999.90 At the hearing all of the issues in the case of petitioner W. F. Boone were settled by stipulations entered into between counsel for the parties.

In the remaining cases all issues have been settled by stipulations save one, namely, whether the profit realized by petitioners from the sale in 1920 of the property of the Brown Coal Company should be taxed on the installment or completed sale basis.

FINDINGS OF FACT.

James D., John A., and W. F. Boone, and Eli J. Taylor each had a one-fourth interest in the Brown Coal Company, a partnership, which, since sometime prior to 1913, owned certain coal leases and operated a coal mine at Nuttallburg, West Virginia. Early in 1920 the partners decided that, in view of the then flourishing condition of the coal market, the time was opportune for an advantageous sale of their properties and, after discussion, they fixed $500,000 as the price at which they would be willing to sell. Thereafter, in April 1920, John A. Boone, as general manager of the company, gave Holly Stover a written option to purchase the properties at that price, of which $100,000 was to be paid in cash, the balance to be represented by four notes, each of like amount and maturing one each year thereafter.

Stover interested the Inland Steel Company in the Brown properties and was authorized to purchase them for $550,000, and by deed dated May 1, 1920, the properties were conveyed to Stover as trustee. This deed recited a total consideration of $550,000, of which $150,000 was paid in cash and the balance was evidenced by notes secured by a deed of trust on the properties and payable in four equal annual installments of $100,000 each. However, the partners had demanded and expected to receive as the selling price of their properties, not $550,000, but $500,000, of which only $100,000 was to be in cash. Before entering into the formal contract of sale, Stover arranged with the partners to make a $150,000 down payment, with the understanding that $50,000 of this amount was to be refunded to him immediately, and the sale was made upon the basis of the option previously given to Stover as supplemented by this

27 B. T. A.