Liberty Service Corp. v. Commissioner

LIBERTY SERVICE CORPORATION, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Liberty Service Corp. v. Commissioner Docket Nos. 53334, 60267. United States Board of Tax Appeals 28 B.T.A. 1067; 1933 BTA LEXIS 1048; August 15, 1933, Promulgated *1048 SALE - CORPORATION ASSETS - PROFIT TAXABLE TO SELLING CORPORATION. - After contracting to sell corporate stocks which it owned and which were at the time of the contract held by banks as collateral security for indebtedness of petitioner to them, petitioner corporation executed assignments of the stock to its stockholders, but no actual distribution of the stock was made to the stockholders. Held, that the profit resulting from the sale of the stock is taxable to petitioner, and that the efforts to consummate the transaction in such a manner as would result in no tax to the selling corporation were ineffectual. Taylor Oil & Gas Co.,15 B.T.A. 609; affd., 47 Fed.(2d) 108; Fred A. Hellebush et al., Trustee,24 B.T.A. 660; affd., 65 Fed.(2d) 902, followed. Robert P. Smith, Esq., and A. H. Diebert, Esq., for the petitioner. Allin H. Pierce, Esq., for the respondent. BLACK *1067 These proceedings, duly consolidated for hearing, are for the redetermination of deficiencies in income tax for the years 1928 and 1929 in the amounts of $56,083.17 and $31,738.61, respectively. The sole*1049 issue is whether profit derived in the taxable years from the sale of certain corporate stock is taxable to the petitioner corporation. FINDINGS OF FACT. The petitioner, whose office and principal place of business during the taxable years was at Philipsburg, Pennsylvania, is a Delaware*1068 corporation, organized in 1922. The petitioner was organized by certain individuals who, prior to the transfers here in question, were stockholders of the American Re-Insurance Co., a Pennsylvania corporation. The primary purpose of its organization was to acquire and hold American Re-Insurance Co. stock. Harry Boulton, president of petitioner, was also president of the American Re-Insurance Co. from 1920 to 1928. The petitioner was an inactive corporation, and did not regularly employ a bookkeeper. Entries were made on its books only once a year. On September 15, 1924, on H. B. Swoope entered into an agreement to sell to Harry Boulton and Oscar H. Erwin all of the stock which he owned, consisting of 3,487 shares, in the American Re-Insurance Co. at $400 per share. The par value of the stock was later reduced from $100 to $10 per share, so that 10 shares were issued for each*1050 share thereof outstanding. On the same date, September 15, 1924, Boulton and Erwin, as parties of the first part, and the petitioner, Liberty Service Corporation, as party of the second part, and seven individuals, all of whom were stockholders of the petitioner, as parties of the third part, entered into an agreement by which the parties of the first part assigned to the petitioner, party of the second part, their right to purchase 3,487 shares of the stock of the American Re-Insurance Co. from Swoope under the terms of the aforementioned agreement. The parties of the third part agreed jointly and severally to indemnify the parties of the first part against any loss that might be sustained in carrying out the agreement of purchase on the part of the petitioner. In September 1924, the seven stockholders of the petitioner entered into a written agreement among themselves guaranteeing as endorsers sundry loans evidenced by notes of the petitioner to be discounted at various banks in connection with the purchase of the Swoope stock, each stockholder agreeing to be bound as endorser on all of the notes in proportion to his stock ownership, notwithstanding the absence or omission*1051 of the signatures of any of them as endorsers upon any particular note. The board of directors of the petitioner corporation held a meeting on March 17, 1928, at which action was taken in reference to negotiations to sell the American Re-Insurance Co. stock owned by the petitioner. The minutes of this meeting read in material part as follows: Harry Boulton reported that he was negotiating a sale of American Re-Insurance Company stock which was proposed to include all of the stock of that Company owned by this Company, namely 37445 shares at $60.00 per share. *1069 In financing the purchase of the above stock, the Company has outstanding: Bank loans $630,000.00 Preferred stock 402,000.00 Due Swoope Est. for 1000 (1,100) shares 440,000.00 Total liability other than common stock $1,472,000.00 The American Re-Insurance Company stock cost this Company $1,508,712.50 or $40.25 plus per share. Moved by Mr. Boulton and seconded by Mr. Beyer that the American Re-Insurance Company stockholdings of this Company be assigned and delivered to the common stockholders of this Corporation as a dividend out of capital assets, the said stockholders to take*1052 up the bank loans upon all of which they are endorsers and also surrender for cancellation the preferred stock they hold and control. After the change in the par value of the American Re-Insurance Co. stock the petitioner corporation received or had 26,445 shares and was committed under its contract with the Swoope estate to purchase 11,000 shares more, making a total of $37,445 shares so owned or controlled by it. The total number of shares of stock outstanding was 75,000 and all shares not owned or controlled by the petitioner were held by the petitioner's stockholders individually. Negotiations looking to the sale of the American Re-Insurance Co. stock were begun with a letter written by Robert C. Ream of Ream, Wrightson & Co., to the petitioner's president, Harry Boulton, on November 15, 1927, and with Boulton's reply dated November 17, 1927. Those negotiations were continued until the sale was finally consummated on April 3, 1928, to a New York syndicate composed of Ream, Wrightson & Co., insurance brokers, Chase Securities Co., bankers, and J. & W. Seligman & Co., bankers. During the month of March 1928, all the individual stockholders of the American Re-Insurance*1053 Co. executed powers of attorney authorizing the petitioner severally to act as their agent in negotiating a sale of the entire 75,000 shares of stock of that corporation. As the negotiations for the sale of the stock proceeded Harry Boulton, who was a lawyer, recognized that if the stock were sold by the petitioner the profit derived therefrom would be taxable to it. He, together with the other officers of the corporation, thereupon considered plans to avoid the taxation of such profit to the corporation. Negotiations with the syndicate were continued during the month of March 1928, and a tentative draft of sale agreement was prepared. Arrangements were also made with the Philadelphia National Bank to act as depository for the certificates of stock to be sold, and as agent for the receipt and disbursement of the cash consideration. *1070 Boulton called meetings of the petitioner's stockholders and directors, which were held on April 2, 1928. The meeting of the stockholders approved and ratified the action of the board of directors on March 17, 1928. The minutes of the directors' meeting held on April 2, 1928, stated as follows: Motion by Mr. Kunz, seconded by*1054 Mr. Shannon that L. W. Beyer as Vice President and H. B. Scott as Secretary and hereby authorized to enter into a contract dated April 2, 1928 for the sale of 75,000 shares of the capital stock of the American Re-Insurance Company to Ream, Wrightson & Co., Inc., Chase Securities Corporation and J. & W. Seligman & Company upon the terms and a form of contract of this Corporation; said officers are also directed to execute for and on behalf of this Corporation, an Escrow Agreement in connection with the said sale agreement to be dated April 2, 1928, providing for the escrow of $500,000 of the purchase price for the said capital stock upon the terms as in the Escrow Agreement set forth; the Company to act under such contracts as agent and trustee for the owners of such stock, which agency and trusteeship shall be evidenced by signed agreements with all of the stockholders of said American Re-Insurance Company taken before this Company signs and delivers said Sale and Escrow Agreement. Upon motion duly made and carried H. B. Scott, Secretary and Treasurer, was authorized and directed to make and execute assignments and transfers to thirty-six thousand seven hundred and fifty (36,750) *1055 shares of stock of American Re-Insurance Company, which number shall include eleven thousand (11,000) shares in name of Provident Trust Company and Maud H. Swoope, executors of H. B. Swoope, Deceased, and the balance in name of Liberty Service Corporation, said assignments and transfers to be in blank and delivered to the common stockholders of this Company in the proportion of their common stockholdings in this Company as per the following schedule: Harry Boulton [5250] John Langdon [5250] W. W. E. Shannon [5250] J. B. Kunz [5250] C. B. Maxwell [5250] H. B. Scott [5250] H. J. Boulton [2625] L. W. Beyer [2625] 36750 On March 30, 1928, Harry Boulton prepared the form of assignment to be used in making the transfer of the 36,750 shares of stock referred to in the directors' minutes of April 2, 1928, and the stock was delivered to the several stockholders present at the stockholders' meeting held on the last mentioned date. The form of assignment was substantially as follows: By direction of the Board of Directors of Liberty Service Corporation, I hereby assign and transfer to you in blank, certificates of stock of America Re-Insurance Company for five thousand*1056 two hundred fifty (5250) shares. LIBERTY SERVICE CORPORATION By (Signed) H. B. SCOTT Secretary-Treasurer. *1071 Each assignment purported to transfer to the stockholder to whom it was addressed 5,250 shares, except in the case of H. J. Boulton and L. W. Beyer, to each of whom there were transferred 2,625 shares. Coincident with the receipt of the above instruments, each of the stockholders executed and delivered another instrument prepared by Harry Boulton in substantially the following form: April 2, 1928. For value received I, the undersigned, hereby sale, [sic], assign, transfer and set over unto all my right, title and interest in and to five thousand two hundred and fifty (5250) shares of stock of American Re-Insurance Company, represented by attached certificates, all of which are under written assignment and transfer powers executed by Liberty Service Corporation, and which shall be used and be effective to transfer title to the above purchaser. One of the stockholders, Harold J. Boulton, a son of Harry Boulton, was absent at school and had not been seen by his father for a month or two prior to March 30, 1928. The following letter was addressed*1057 to him: March 30, 1928. Mr. Harold J. Boulton, Walter Hastings Hall, Cambridge, Mass. Dear Harold: I enclose herewith 27 forms of assignment of stock. Will you please sign same as Harold J. Boulton and have same witnessed. Do not fill up the dates or any other of the blank spaces. The Liberty Service Corporation will be assigning to you 2625 shares of the American Re-Insurance Company stock and you will sell the same by these assignment forms. If the Liberty Service Corporation sold the stock itself the profit would be taxable in its treasury and again to its stockholders when paid out in dividends. We are avoiding this by having the company distribute the stock to its stockholders and letting them sell. Please return forms by next mail. I expect the transaction will be moved thru next week. The assignments above mentioned did not identify by number the certificates for any particular shares of stock sought to be transferred. At the time the instruments of assignment were executed petitioner did not have the stock certificates in its possession and consequently no certificates were endorsed or delivered to the stockholders. Most of the certificates were*1058 deposited as collateral security with the banks from which the money used to purchase the stock had been borrowed; and the certificates evidencing the stock which the petitioner controlled under its contract to purchase from the Swoope estate were in the possession of the creditors of that estate. In connection with the assignments above referred to, the stockholders did not execute any written instrument to indicate that they *1072 had assumed liability for payment of the petitioner's obligations, other than as endorsers on its notes, nor did they give any written notice to the petitioner's creditors that they had assumed the obligations. The assignments were not recorded on the books of the stock transfer agent of the American Re-Insurance Co. On April 19, 1928, subsequent to delivery of the stock assignments, the petitioner received a dividend on the transferred stock in the amount of $13,222.50. On the afternoon of April 2, 1928, following the directors' meeting above mentioned, petitioner's officers went to New York, where they met representatives of the purchasing syndicate with a view to arranging a contract of sale. They informed the syndicate at that time that*1059 11,000 shares of American Re-Insurance Co. stock would have to be excluded from the sale because that number of shares had not yet been acquired by the petitioner under its contract of purchase from the Swoope estate, and hence that number of shares was not available for sale by the petitioner. The syndicate insisted, however, that all outstanding capital stock of the American Re-Insurance Co. be transferred, and it was finally agreed that the syndicate would advance the sum of $440,000 needed to pay the contract price and make the stock available. On the following day, April 3, 1928, the petitioner's officers and representatives of the syndicate met in the office of the Philadelphia National Bank for the purpose of closing the sale. There were also present a representative of the Swoope estate and a representative of the creditor which held the estate's stock as collateral security. The representatives of the syndicate examined the certificates of stock which were exhibited, and, after being assured by the Philadelphia National Bank that all other certificates were in transit from the banks which held them as collateral, they made the payment of $440,000 to the creditor of the*1060 Swoope estate and took up the stock. The parties then executed the contract of sale, which in material part reads as follows: APRIL 2, 1928. Ream Wrightson & Co., Inc. Chase Securities Corporation J. & W. Seligman & Co. New York, N.Y. Dear Sirs: The undersigned, who owns or controls 75,000 shares of the capital stock of American Re-Insurance Company, being all of the issued and outstanding stock of that company, hereby confirms the agreement reached with you whereby the undersigned has agreed to sell and deliver to you and you have agreed to purchase all of said shares in reliance upon the representations herein contained and subject to the terms and conditions hereof. * * * *1073 6. You agree to purchase and pay for, and the undersigned agrees to deliver to you all, but not less than all, of the 75,000 shares of the issued and outstanding capital stock of the Company for a sum not more than $4,500,000, and not less than $4,000,000 payable upon the delivery of the stock (as hereinafter provided) as follows: (a) $4,000,000 in cash payable to or on the order of the undersigned; and (b) $500,000 in cash payable to The Chase National Bank of the City of*1061 New York, as Depositary, to be held by it together with all interest thereon and appreciation of principal thereof and invested by it, all as provided in the form of Escrow Agreement hereto attached as Exhibit 4, which shall be executed by the parties thereto simultaneously with the deposit of said $500,000. * * * 10. The present owners of stock of record, including the undersigned, shall be entitled to receive from the Company the regular 5% dividend for the quarter ending March 31, 1928, usually declared at the April meeting of the board of directors and paid within four days following May 1 of each year. If the foregoing is in accordance with your understanding of the agreement arrived at between us, will you please indicate your acceptance thereof on a duplicate of this letter enclosed for the purpose. LIBERTY SERVICE CORPORATION by (signed) L. W. BEYER Vice President (signed) H. B. SCOTT Secretary The foregoing is hereby approved and accepted. REAM, WRIGHTSON & CO. INC. by (signed) ALBERT C. REAM, Pres. CHASE SECURITIES CORPORATION by (signed) H. G. FREEMAN, Pres. J. & W. SELIGMAN & CO. by (signed) FRANCIS A. RANDOLPH, *1062 A Partner. In addition to the sale agreement, the parties executed an escrow agreement, which provided that a portion of the purchase price should be held in escrow until all details of the transaction had been completed. Both the sale agreement and the escrow agreement were executed by the petitioner. The $4,000,000 paid pursuant to the sale agreement was paid or credited to the petitioner. The negotiations with the Philadelphia National Bank as depository were had with the petitioner's officers. The records of the stock transfer agent of the American Re-Insurance Co. as of April 16, 1928, showed that, of the stock which the syndicate acquired, the petitioner was the holder of 26,445 shares and the executors of the Swoope estate held 11,000. The cash received in 1928 by the Philadelphia National Bank from the syndicate was used in part to pay the promissory notes of the petitioner against which the stock had been pledged as collateral security, and the balance was deposited to the credit of the petitioner *1074 in a bank at Philipsburg, Pennsylvania. The petitioner used the money thus received to pay its creditors, and distributed the remaining balance to its*1063 stockholders. The stockholders surrendered to the petitioner for cancellation all of its outstanding preferred stock held by them severally. The money held under the escrow agreement and which was paid over in 1929 pursuant to the sale contract was paid directly to the petitioner's stockholders. The following facts were stipulated by the parties: At the time when the Liberty Service Corporation executed its agreement to sell 75,000 shares of the capital stock of American Re-Insurance Company, there were outstanding the following notes payable against which there were pledged as collateral security shares of stock of American Re-Insurance Company as follows: Creditor Amount of Collateral loan Franklin 4th St. Nat. Bank, Phila $150,000.00 8000 Shs. 1st Nat. Bank, Pittsburgh, Pa 100,000.00 6000 Shs. Clearfield Nat. Bank, Clearfield, Pa 40,000.00 3000 Shs. Moshanon Nat. Bank, Phillipsburg, Pa 80,000.00 3000 Shs. 1st. Nat. Bank, Houtsdale, Pa 25,000.00 1000 Shs. Lancaster Trust Co., Lancaster, Pa 50,000.00 1400 Shs. Total Loans $445,000.00 22400 Shs. Swoope Estate (Bals. of Purchaser's price) 440,000.00 11000 Shs. Total $885,000.00 33400 Shares *1064 The loan at the Franklin 4th St. National Bank, Phila., Pa. was made January 3, 1928, payable April 3, 1928, at which time it was renewed and payment was made on April 16, 1928, at which time collateral was surrendered. The maker of the notes was the Liberty Service Corporation. The loan at the First National Bank at $150,000 Pittsburgh, Pa., was made September 28, 1925 for and reduced by the following payments: December 2, 1925 $25,000 January 2, 1926 5,000 December 31, 1926 5,000 April 2, 1927 5,000 November 9, 1927 5,000 February 1, 1928 5,000 50,000 Balance 100,000 On April 3, 1928, the Pittsburgh bank forwarded the note and the collateral to the Phila. National Bank at Phila. for payment which was made on April 16, 1928. The maker of the note was the Liberty Service Corporation and the endorsers were: C. D. Maxwell H. B. Scott W. W. E. Shannon John Langdon L. W. Beyer O. H. Irwin J. G. Kunz Harry Boulton *1075 The original collateral consisted of 602 1/2 shares of American Re-Insurance Company common stock which was exchanged in Feb. 1928 for 6000 shares of the same stock. The loan at the Clearfield*1065 National Bank, Clearfield, Pa., was made September 30, 1927, and paid April 18, 1928. The collateral originally was 300 shares of American Re-Insurance Company common stock which was exchanged in 1928 for 3,000 shares of the same stock. The maker of the note was the Liberty Service Corporation. The loan at the Moshanon National Bank, Philipsburg, Pa., was made October 1, 1926. As the bank's loaning capacity was $30,000 this loan was made as follows: $30,000 to the Liberty Service Corporation, $25,000 to John Langdon and $25,000 to W. W. E. Shannon the collateral being 100 shares of American Re-Insurance Company common stock for each loan or a total of 300 shares which was exchanged in January or February 1928 for 3,000 shares. The loans were paid April 20, 1928. The loan at the First National Bank, Houtsdale, Pa. was made January 28, 1926 and paid April 18, 1928. The original collateral was 100 shares of American Re-Insurance Co. Common stock which was exchanged January 16, 1928 for 1,000 shares of the same stock. The collateral was surrendered upon payment of the loan. The maker of the note was the Liberty Service Corporation. The loan at the Lancaster Trust Company, *1066 Lancaster, Pa., was made September 16, 1925. The maker of the note was the Liberty Service Corporation and the endorsers were: Harry Boulton, C. B. Maxwell, O. H. Irwin, W. W. E. Shannon, H. B. Scott, L. W. Beyer, J. B. Kunz, John Langdon The original collateral was 143 shares of American Re-Insurance company common stock which was exchanged in January 1928 for 1,400 shares of the same stock. The note and collateral were forwarded to the Phila. National Bank, Phila. Pa. for payment, which was made April 17, 1928. The 11,000 shares of American Re-Insurance Co. stock held by the Swoope Estate were part of a purchase made in a prior year which was to be delivered upon the payment of the purchase price or $440,000. The cost of the Liberty Service Corporation of the 37,445 shares of capital stock of the American Re-Insurance Company, which it contends were transferred to its stockholders on or about March 30, 1928, was $1,473,937.50. The sum of $6.67 per share of American Re-Insurance Company stock which was placed in escrow at the time of the sale of said stock in April, 1928 was invested in securities and, at the time of the distribution of the escrow fund*1067 in the year 1929 said investment had increased in value so that it equaled at the time of the distribution $7.582 per share. * * * OPINION. BLACK: Petitioner's assignment of error is to the effect that the Commissioner of Internal Revenue has erroneously and improperly determined that the petitioner was the owner of the stock of the American Re-Insurance Co. at the date this stock was sold and that *1076 consequently the deficiencies which have been determined upon that basis are wrong. Respondent contends that the attempted distribution to the stockholders by petitioner of the stock in question was ineffectual and that consequently the profit from the sale of the stock is properly taxable to the petitioner. We think this contention of respondent must be sustained. ; affd., ; ; ; affd., ; ; *1068 ; ; affd., . Petitioner commenced negotiations for the sale of this stock in November 1927, and these negotiations continued without interruption until the sale was consummated on April 3, 1928. Admittedly, efforts were made prior to the consummation of the sale to conduct it in such a manner as would result in no tax to the corporation (petitioner). It is of course lawful for taxpayers to use means and methods which are legal and not tainted with fraud to avoid taxes. ; . There is no suggestion of fraud here. However we think the efforts of the parties to consummate the sale of the stock without resulting in taxable profits to the corporation were ineffectual. Prior to the delivery of the so-called "assignments" to petitioner's stockholders, details of which are fully narrated in our findings of fact, all matters which insured the final consummation of the sale had been agreed upon. The form of the sale contract had been determined; *1069 the sale price and the terms of payment had been fixed; and the Philadelphia National Bank had been retained as depository to deliver the stock certificates and receive the cash consideration and otherwise act as agent of the parties to the sale to clear the transaction. This sale agreement to which we are now referring, dated April 2, 1928, states, among other things: The undersigned * * * who owns or controls 75,000 shares of the capital stock of American Re-Insurance Company, * * * hereby confirms the agreement reached with you. * * * If the foregoing is in accordance with your understanding of the agreement arrived at between us, will you please indicate your acceptance * * *. LIBERTY SERVICE CORPORATION. Acceptance was noted at the bottom of this letter by the purchasers of the stock, viz., Ream, Wrightson & Co., Chase Securities Corporation, and J. & W. Seligman & Co. *1077 The so-called "assignments" were all prepared by petitioner's president in advance of the meeting of April 2, and the stockholders were asked to sign these instruments at that meeting. The letter to Harold J. Boulton under date of March 30, 1928, given in full in our findings of fact, *1070 throws considerable light on the manner which was being pursued in the sale of the stock. The letter states: I enclose herewith 27 forms of assignment of stock. Will you please sign same as Harold J. Boulton and have same witnessed. Do not fill up the dates or any other of the blank spaces. The Liberty Service Corporation will be assigning to you 2625 shares of the American Re-Insurance Company stock and you will sell the same by these assignment forms. If the Liberty Service Corporation sold the stock itself the profit would be taxable in its treasury and again to its stockholders when paid out in dividends. We are avoiding this by having the company distribute the stock to its stockholders and letting them sell. [Italics supplied.] As a matter of fact no stock was distributed by the petitioner to its stockholders. Petitioner was in no position to make such a distribution. All the stock was held by various banks as collateral security for indebtedness of petitioner to them. Not until after the sale was completed and the money paid over by the purchasers and part of it used to pay these debts of petitioner was the stock clear and ready to be delivered. When it*1071 was released by the payment of petitioner's indebtedness to the banks which held it as collateral security, it was then delivered, not to the stockholders of petitioner, but to the purchasers - Ream, Wrightson & Co., Chase Securities Corporation, and J. & W. Seligman & Co. So, notwithstanding the forms and devices which were resorted to, we do not think any distribution of the stock in question was ever made by petitioner to its stockholders and consequently we hold that the sale of the stock was by petitioner to the purchasers above named. In , a corporation, acting through its general manager, agreed orally to sell its assets at a fixed price. After the completion of all details which insured the final consummation of the sale, the stockholders, with the intent to avoid the incurring of a tax by the corporation, caused a transfer of the assets to be made without consideration to the president of the corporation, who in turn conveyed to the purchaser and collected the sale price. The Board held that the gain from the sale of the assets was taxable to the corporation and that the efforts to avoid the tax by the methods used were ineffectual. *1072 A situation very similar to the Duggan case was the case of In that case, after the president and the secretary-treasurer of the Blackburn Varnish Co. had negotiated a sale of its assets to the Cook Paint & Varnish Co., the *1078 following steps were taken so as to consummate the sale in such a manner that there would be no tax to the selling corporation, the Blackburn Varnish Co.: First, there was a special meeting of all the stockholders of the Blackburn Co. in person or by proxy at which a resolution was unanimously adopted authorizing the dissolution and liquidation of the company and the conveyance of its assets to Hellebush and Lippelman as trustees for the stockholders, with full powers to dispose of the company's property. The resolution further directed these trustees, after "final liquidation" and deduction of expenses, to distribute all remaining property or proceeds in kind pro rata to the stockholders, and contained an instruction to the officers of the company to take the necessary steps to procure its dissolution and the conveyance of its property to the trustees. Second, following the stockholders' *1073 meeting on the same day, the officers of the Blackburn Co. "in consideration of the sum of one dollar ($1.00) and other good and valuable considerations" executed a bill of sale of all the personal property of the Blackburn Co. to the above named trustees for the stockholders, and the corporation by its proper officers likewise on the same day executed and delivered to these trustees, designating them as trustees for the stockholders, its deed conveying to them its real estate in fee simple. Third, on the same day an agreement was executed for the sale to the Cook Co. of all the assets to which Hellebush and Lippelman, as trustees for the stockholders, had received title from the Blackburn-Varnish Co. It was signed by the trustees and by Cook, president of the Cook Co., and by the Southern Ohio Savings Bank & Trust Co., escrow agent. The instrument recited that the trustees agreed to convey all property of whatever kind or nature which they had received from the Blackburn Co. except cash and accounts and bills receivable, and further recited the concurrent delivery of a deed to the real estate and of an instrument of conveyance of all other property to the escrow agent, for which*1074 a deposit of the sum of $100,000 on the purchase price was made. The Cook Co. agreed to use reasonable diligence to collect the outstanding accounts and bills receivable and to account weekly therefor to the trustees. We held that notwithstanding the steps taken, the assets were those of the corporation and the profit on the transaction was earned by the corporation, Blackburn Varnish Co., and the assessment of the taxes based thereon was valid. As has already been stated, our decision was affirmed by the United States Circuit Court of Appeals, Sixth Circuit, June 29, 1933. *1079 We do not think there is enough difference between the facts of the instant case and the facts which were present in the Duggan, Hellebush and other cases, cited above, to justify us in making a distinction. Reviewed by the Board. Decision will be entered for respondent. TRAMMELL dissents.