Perata v. Commissioner

JOHN M. PERATA, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. PAUL MASONI, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. GUILIANO ROLANDELLI, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Perata v. Commissioner Docket Nos. 57479, 57923, 58413, 67286. United States Board of Tax Appeals 33 B.T.A. 843; 1935 BTA LEXIS 696; December 31, 1935, Promulgated *696 1. A syndicate was formed in 1928 for the purpose of supplying cash to a corporation to enable it to buy certain assets. The syndicate acquired stock of the corporation and sold it at a profit and and before the close of the year had substantially completed its agreement to supply cash. The balance of the cash owing was covered by a dividend declared before the end of the year. Within the year the corporation released to the syndicate the remaining stock, which had been held in escrow. Held, that the syndicate was a joint venture and dividends received and the profit realized on on the sale of stock in 1928 are income to the syndicate members for that year. 2. Dividends declared in 1928, payable in stock of another corporation, held, following Elvira Sectena,32 B.T.A. 675, to be income in 1928. Leo J. McEnerney, Esq., for the petitioners. Myrtile Cerf, C.P.A., appearing in addition for petitioner Rolandelli. Allin H. Pierce, Esq., for the respondent. ARUNDELL *844 The respondent has determined deficiencies in income tax for the years and in the amounts as follows: Name Year Deficiency John M. Perata [1928] $7,490.40 Paul Masoni [1928] 3,272.15 Guiliano Rolandelli [1928] 6,775.77 Do [1929] 3,992.00 *697 The question in each of the cases for the year 1928 is whether or not petitioners realized taxable income from the operations of the Italo Petroleum Syndicate, of which they were members. The question in the case of Guiliano Rolandelli, in Docket No. 67286, is whether dividends paid by the Bancitaly Corporation and National Bankitaly Co. were income in 1928 or 1929. The facts were stipulated. FINDINGS OF FACT. The syndicate Matter. The petitioners are residents of San Francisco, California. During 1928 petitioners Perata and Masoni were directors of the Italo Petroleum Corporation of America, and during the period March 14 to Cotober 16, 1928, petitioner Perata was president of that corporation. Petitioner Rolandelli was not an officer or director of the Italo Petroleum Corporation of America during the year 1928. The Italo Petroleum Corporation of America (hereinafter referred to as to Italo Corporation) is a corporation organized in 1928 under the laws of the State of Delaware to engage in the business of producing oil and distributing oil products. It had authorized capital stock of $25,000,000, divided into 16,000,000 shares of common stock with a par value*698 of $1 per share, and 9,000,000 shares of preferred stock with a par value of $1 per share. Prior to the issuance of the stock involved in the present proceeding, the corporation had issued and outstanding 1,700,000 shares of preferred stock and 2,200,000 shares of common stock. *845 In the year 1928 the Italo Corporation undertook to purchase and acquire the businesses, assets, and properties of certain other oil companies in the State of California (hereinafter referred to as the oil companies), in consideration for certain cash payments and the issuance of certain shares of its own capital stock. For the purpose of effecting such purchases, it entered into written purchase agreements with the oil companies. These contracts required the delivery to the said oil companies, as consideration for their properties, 1,500,000 shares of the preferred stock of the Italo Corporation, 4,500,000 shares of the common stock of the Italo Corporation, and cash in the sum of $3,433,228.53. The Italo Corporation did not have available at the time sufficient cash with which to make the payments of $3,433,228.53. In order to raise this amount certain individuals, herein designated as*699 syndicate members, entered into a written agreement dated July 12, 1928. This agreement, after reciting that the subscribers thereto desired to form a syndicate for the purpose of raising the necessary capital to assist the Italo Corporation in consummating the purchase of the oil companies' properties, and after providing that the syndicate was thereby formed between the subscribers and the parties thereto to assist in consummating such purchases, and that the subscribers appointed Fred Shingle as manager of the syndicate, and that they thereby agreed to raise through the syndicate not less than $1,000,000 nor more than $3,000,000, the exact amount of which was to be fixed by the syndicate manager, further provided: FIFTH: Said Syndicate Manager hereby agrees to use said syndicate fund for the following purposes and none other, to-wit: (a) Said Syndicate Manager shall forthwith, procure from said Italo Petroleum Corporation of America, or its nominee, an assignment of the contract or contracts of said Italo Petroleum Corporation of America, or other parties, to purchase and acquire the properties and/or interests therein, hereinabove referred to, in part for cash and the balance*700 in stock of the Italo Petroleum Corporation of America, all in accordance with the terms and conditions herein set forth. (b) Said Syndicate Manager shall thereupon and out of this syndicate fund make the necessary cash payments to each of said companies as provided in said contract or contracts of purchase and shall thereupon forthwith enter into a contract with said Italo Petroleum Corporation of America for the sale, transfer and assignment to said Italo Petroleum Corporation of America, of the business assets and properties, of, and/or interests in, said companies for and in consideration of the issuance to said Syndicate Manager by said Italo Petroleum Corporation of America of approximately 12,000,000 shares of its suthorized capital stock to be issued by said Italo Petroleum Corporation of America to said Syndicate Manager, if, when and as permitted by the Commissioner of Corporations of the State of California. *846 (c) From the shares of stock of the Italo Petroleum Corporation of America so received, said Syndicate Manager shall pay over, transfer and deliver sufficient stock to obtain the sassignment of the contract or contracts of purchase for said companies*701 and to complete the payment of the stock obligations contained therein, but in no event to exceed an aggregate of 6,000,000 shares of said stock. (d) Said Syndicate Manager shall cause the balance of said shares to be sold for the highest price obtainable and in such manner as he may deem best and out of the proceeds from his sale thereof he shall pay: 1st. The remaining cash payments due and payable on account of the purchase price of the business properties and assets of, and/or interests in said companies, the total cash payments in no event however to exceed $3,500,000; and 2nd. After payment of all necessary expenses in connection with this syndicate the Syndicate Manager is hereby authorized to pay to himself two and one-half per cent of any and all net profits of this syndicate, as his compensation for managing this syndicate, provided, however, that his said compensation shall in no event exceed $50,000.00; and 3rd. After payment of all the payments hereinabove provided to be made by the Syndicate Manager, he shall forthwith distribute the balance to the Subscribers hereto, proportionately as their interests appear therein. * * * SEVENTH: Said Syndicate Manager*702 is hereby authorized to enter into any and all agreements and undertakings which in his judgment may be for the best interests of the Subscribers, with reference to the matters contemplated in this agreement, but he shall have no right, power or authority to in any wise bind any Subscriber hereto in an amount over and above the amount of his subscription. It is expressly understood and agreed, however, that said Syndicate Manager shall have sole and absolute discretion in all matters and things whatsoever pertaining to the subject matter of this agreement and shall have no personal or individual liability of any kind or character for any act or thing done or omitted by him to be done in connection therewith, except for the re-payment of said Subscribers of the sums advanced by them and the distribution of any and all profits in the manner and from the sources hereinabove set forth. * * * NINTH: It is further understood and agreed that said Syndicate Manager may in his discretion apply the first $500,000.00 herein subscribed as and for an initial payment on account of said business properties and assets, or any of them, proposed to be purchased by this syndicate, notwithstanding*703 the fact that the minimum sum of $1,000,000.00 may not at that time have been fully subscribed or paid. TENTH: This syndicate shall continue for a period of twelve months from date hereof, but may in the discretion of said Syndicate Manager be extended for a period of six months thereafter; provided that in the event said sum of $500,000.00 is not subscribed and paid over to said Syndicate Manager on or before the 1st day of August, 1928, then and in that event all of the sums subscribed and paid may by said Syndicate Manager be repaid to said Subscribers proportionately as their interests appear herein, in which event this syndicate shall terminate. *847 For the purpose of effecting said purchases of the properties of the oil companies and also for the purpose of carrying out the syndicate agreement, the Italo Corporation obtained permission from the Commissioner of Corporations of the State of California to issue 4,500,000 shares of its preferred stock and 7,500,000 shares of common stock to Maurice C. Myers as trustee for the Italo Corporation. Although the written authorization of the Corporation Commissioner was that the Italo Corporation was "to sell and issue" *704 the stock to a trustee, no sale was in fact made. The stock was deposited with the trustee under instructions to deliver it in accordance with the agreement of the parties mentioned in the following agreements, to wit: the syndicate agreements heretofore referred to and two agreements, one of which was entered into August 13, 1928, between the Italo Corporation and Maurice C. Myers, therein called the trustee, by which the trustee recited that he held, as agent for the company, the contracts of purchase heretofore referred to, which required the issuance to the owners of said properties approximately of 1,500,000 shares of preferred stock and 4,500,000 shares of common stock, and the payment of approximately $3,500,000; and a syndicate had been formed, managed by Fred Shingle, which had undertaken to furnish the said sum of $3,500,000 "in consideration of 3,000,000 shares of common and 3,000,000 preferred shares of the company's stock", that such plan had been approved by the Italo Corporation; that the company had issued said 4,500,000 shares of preferred and 7,500,000 shares of common stock to the trustee and then provided: FIRST: The Company hereby authorized, empowers and directs*705 said Trustee to assign and deliver to the parties entitled thereto under the abovementioned contracts, such shares as may be necessary to perform and carry out all of said contracts; and to assign to and deposit with Shingle Brown & Company, as escrow holder, three million shares of common and three million shares of preferred capital stock of the Company, with instructions and authority to deliver the same to said Syndicate Manager ratably in proportion that the sums advanced by the Syndicate in payments on said properties bear to the total Syndicate obligation of $3,500,000.00 provided that the Syndicate Manager shall first agree to apply all proceeds from the sale of stock received by him to the payment of money obligations under said contracts, and provided further that said escrow holder shall agree that in the event of failure of said Syndicate Manager to meet any of such money obligations under said contracts, the said escrow holder shall forthwith return to the Trustee all stock which has not theretofore been delivered by it to said Syndicate Manager, as aforesaid. SECOND: The Trustee covenants and agrees to assign and deliver said stock as herein instructed, and agrees*706 to hold, for the benefit of the Company, any balance of said block of six million shares which may not be required of him in meeting the obligations to deliver stock of the Company under Said contracts. *848 The material parts of the second agreement also dated August 13, 1928, which was wntered into between the Italo Corporation (referred to as the Company), Shingle Brown & Co., a corporation (referred to as the escrow holder), Fred Shingle (referred to as the syndicate manager), and Maurice C. Myers (referred to as the trustee), after reciting the agreement of the same date just referred to, between the company and the trustee, provided: FIRST: The Escrow Holder agrees to comply strictly with the terms and conditions of the agreement attached hereto under which it has received the above mentioned stock of the Company and agrees that it will deliver no part of said stock to the Syndicate Manager except as and when the Syndicate Manager makes payments on the contracts referred to in said agreement and then ratably in the proportion that the sums advanced by the Syndicate Manager in payments on said contracts bear to the total syndicate obligation of H. J. B. [sic]*707 not more than Three Million Five Hundred Thousand Dollars ($3,500,000.00). SECOND: The Syndicate Manager agrees that the proceeds from the sale of all stock received by him from the Escrow Holder shall be applied exclusively to the payment of money obligations under said contracts until all such obligations (provided they do not exceed Three Million Five Hundred Thousand Dollars ($3,500,000.00) are fully discharged. At or about the time of the execution of the foregoing agreements, the several syndicate members signed the syndicate agreement and paid to the syndicate manager their respective contributions, in the aggregate sum of $1,911,375. The petitioners signed the agreement as syndicate members. The amounts paid in by the petitioners and the participating interests thereby acquired were as follows: Amount paid in Participating interest Perata $125,000 6.539794% Masoni 100,000 5.23183% Rolandelli 106,000 5.54574% Upon the execution of the foregoing agreements, the Italo Corporation delivered to Maurice C. Myers, as trustee, 4,500,000 shares of its preferred stock and 7,500,000 shares of its common stock. Thereupon Myers, acting as trustee, *708 pursuant to the foregoing agreements delivered to the oil companies, as partial consideration for their businesses and assets, 1,500,000 shares of the preferred stock and 4,500,000 shares of the common stock; and he delivered the remainder of the stock, consisting of 3,000,000 shares of preferred and 3,000,000 shares of common stock, to Shingle Brown & Co., as escrow holder, pursuant to the terms of the aforesaid agreement. *849 Fred Shingle, who was the syndicate manager, was also president of Shingle Brown & Co., the escrow holder, which was a corporation. Prior to September 1928 Fred Shingle, as syndicate manager, made cash payments to Maurice C. Myers, trustee, pursuant to the terms of the above agreements in the aggregate sum of $972,175, which payments were made from the cash which had been paid to him by the several syndicate members under the syndicate agreement, and thereupon the trustee caused the escrow holder to release to the syndicate manager certain of the shares of stock of the Italo Corporation, as provided by the agreements. The stock so released was then sold by the syndicate manager and the proceeds from the sales were delivered to Myers as trustee, *709 in accordance with the terms of the agreement of August 13, 1928, and thereupon the trustee caused the escrow holder to release additional shares of stock to the syndicate manager. These operations were repeated until December 20, 1928, when total payments had been made by the syndicate manager to the trustee in the total sum of $3,400,000. On December 20, 1928, there remained a balance due from the syndicate manager to the trustee of $33,228.53, which sum, as hereinafter stated, remained outstanding on the books of the trustee until the year 1929. However, the Italo Corporation on December 7, 1928, declared a dividend on its preferred stock to holders of record on December 31, 1928, payable January 20, 1929, which dividend would be payable on shares of stock in the hands of the syndicate manager and/or the escrow holder, which remained unsold on December 31, 1928. The Italo Corporation and Maurice C. Myers under date of December 20, 1928, advised the escrow holder in writing by letter that the syndicate manager had fulfilled all obligations under the terms of the foregoing agreements, and directed the escrow holder to release to the syndicate manager all remaining shares of*710 stock of the Italo Corporation which were then in the hands of the escrow holder, said stock so delivered to be free and clear of any and all conditions and restrictions. Thereupon all shares of stock remaining in the possession of the escrow holder were delivered from the escrow to the syndicate manager with the consent of the Italo Corporation, the trustee, the escrow holder, and the syndicate manager. The balance of $33,228.53 outstanding on the books of the trustee, thereafter, in the year 1929, was satisfied by application of a dividend which had been declared by the Italo Corporation on December 7, 1928, as aforesaid. A summary of the cash payments made by the syndicate manager to the trustee and the shares of stock released to the syndicate manager *850 by the escrow holder at the direction of the trustee, is as follows: Shares delivered by escrow holder to syndicate manager Date Cash paid by Common stock Preferred stock syndicate manager to trustee Sept. 30, 1928 $1,322,175.00 139,500 139,500 October 1928 1,995,709.12 1,052,519 40,974 Oct. 31, 1928, total 3,317,884.12 1,192,019 180,474 November and December 1928 82,115.88 720,840 127,840 Dec. 20, 1928, total 3,400,000.00 1,912,859 308,314 Dec. 20, 1928 [1] 1,087,141 2,691,686 Dec. 31, 1928, total 3,400,000.00 3,000,000 3,000,000 May 1929, by credit of dividend, as aforesaid 33,228.53 Total 3,433,228.53 3,000,000 3,000,000 *711 Substantially all of the stock of the Italo Corporation sold by the syndicate manager was sold to various brokers in the year 1928, and principally during the month of October 1928, in blocks of several thousand shares; and only a negligible number of shares were sold to individual customers. The practice of the syndicate manager was not to take possession of the shares of stock which were released to him, from time to time, by the escrow holder at the direction of the trustee, but to allow the stock to remain in the hands of the escrow holder until it was sold, and the stock then was delivered at the direction of the syndicate manager to the purchaser or his order. When shares of stock were sold, as hereinbefore stated, they were sold by the syndicate manager through the agency of a stockbroker, who, at the direction of the syndicate manager, paid the proceeds to the Shingle Brown Co., which, at the direction of the syndicate manager, paid them to Maurice C. Myers, trustee. Prior to December 20, 1928, sales of Italo Corporation stock were consummated by the syndicate manager and proceeds therefore were received by him as follows: 1,912,856 shares of common stock sold for $1,996,623.65 308,314 shares of preferred stock sold for 247,623.33 Total proceeds received 2,224,306.98 *712 The foregoing were the only sales of shares of stock of the Italo Corporation made in the year 1928 from the 6,000,000 shares delivered by the trustee to the escrow holder. *851 On December 20, 1928, the syndicate manager distributed $668,981.25 cash pro rata to the syndicate members, of which distribution the petitioners herein received the following amounts: Perata $43,750 Masoni 35,000 Rolandelli 37,100 Following this cash distribution, there remained in the possession and/or control of the syndicate manager certain amounts of cash of the syndicate, and also 1,087,141 shares of common stock and 2,691,686 shares of preferred stock of the Italo Corporation. No return of income for Federal tax purposes was filed by the syndicate, syndicate manager, escrow holder, or trustee, for the year 1928 or any other taxable period. The petitioners reported no income in their returns for 1928 from their interests or participation in the syndicate. Upon audit of the returns the respondent determined that they had realized income from participation in the syndicate and added to income the amounts determined as follows: Petitioner Dividends Other income Total Perata $3,390.56 $43,312.96 $46,703.52 Masoni 2,712.56 34,649.24 37,361.80 Rolandelli 2,875.11 36,728.19 39,603.30 *713 The respondent computed the income of the syndicate from sales of stock of the Italo Corporation as follows: Sales of Italo stock: 1,912,859 shares Common $1,996,683.65 308,314 shares Preferred 247,623.33 Total Selling Price $2,244,306.98 Cost of Sales: 1,912,859 Shares Common at .76293967 * 1,459,396.01 308,314 Shares Preferred at .38146983 * 117,612.49 Total Cost 1,577,008.50 Gross Profit from Sales 667,298.48 Interest received 3,241.25 Gross Income exclusive of dividends $670,539.73 Deductions Expenses 8,262.13 Net Income exclusive of Dividends 662,277.60 Dividends received in 1928 51,843.50 Total amount disbursed to and for the Italo Petroleum Corp. for which 3,000,000 shares of Common and 3,000,000 shares of Preferred stock were issued $3,433,228.53 *852 Market value of Common stock during 1928 was approximately twice that of Preferred stock. On this basis, the above cost was divided as follows: 3,000,000 shares, Preferred Stock, Cost $1,144,409.51 3,000,000 shares, Common Stock, Cost 2,288,819.02 $3,433,228.53 *714 Cost per share - Preferred Stock, $.38146983 Cost per share - Common Stock, .76293967 The Dividend Matter. In 1928 petitioner Rolandelli was the owner of 4,733 shares of the capital stock of the Bancitaly Corporation and 250 shares of the capital stock of the National Bankitaly and/or Bank of Italy, N.T. & S.A. On September 19, 1928, the directors of the Bancitaly Corporation declared a dividend of 130,000 shares of the stock of the Bank of America National Association, one share to the holder of each 40 shares of its own stock. On September 26, 1928, the directors of the National Bankitaly Co. declared a dividend of 50,000 shares of the stock of the Bank of America National Association, payable to the shareholders of the Bank of Italy National Trust & Savings Association, in the ratio of 1 share to each 40 shares of stock owned on November 1, 1928. On September 27, 1928, A. P. Gianini, president of both corporations declaring the dividends, addressed a letter to the stockholders, advising them of the dividend declarations and stating that certificates would be mailed "as soon as it will be practicable to do so, which should be on or before January 2, 1929." Pursuant*715 to the dividend declarations above referred to, the petitioner received 124 shares of stock of the Bank of America National Association in 1928 or 1929. The petitioner filed his income tax returns for the years 1928 and 1929 on the cash receipts and disbursements basis. He did not report the dividends in income for either year. The respondent included in petitioner's income for 1929 the above mentioned dividends, as subject to surtax, in the amount of $23,994. It is stipulated that if the Board holds the dividends not taxable in 1929, then the petitioner is taxable thereon in 1928 in the amount of $21,700 as dividends subject to surtax. The petitioner in 1929 disposed of the 124 shares of dividend stock and it is stipulated that if the Board holds such dividends are not taxable in 1929, then the profit on the disposition of the dividend shares in 1929 included in taxable income shown in the notice of deficiency should be increased by $2,002.94. *853 OPINION. ARUNDELL: The syndicate, of which the petitioners were members, was organized in July 1928 for the sole purpose of raising funds to enable the Italo Corporation to make the cash payments required by its contracts*716 of purchase of the assets or stock of various corporations. A careful reading of the articles under which the syndicate was organized discloses that the syndicate manager had no authority to go further than the raising of such funds, the payment of the debts of the Italo Corporation, and distribution of the remaining proceeds among the syndicate members. The life of the syndicate was limited, and it was to engage in but the one operation. The syndicate performed its functions, not as originally contemplated through the taking over of the Italo Corporation's contracts, but through what in substance was the purchase and sale of Italo Corporation stock. The petitioners say that there was no sale of the stock to the syndicate. The facts establish that there was a sale. The stock was placed in escrow, the syndicate paid to the trustee certain of the funds advanced by its members and drew down a block of stock which was sold and the proceeds used to draw down additional stock and, in the words of the stipulation, "These operations were repeated until December 20, 1928, when total payments were made by the syndicate manager to the trustee in the total sum of $3,400,000." This, in*717 our opinion, was a purchase and sale of Italo Corporation stock by the syndicate. All the parties knew the amount of stock that the syndicate was to take and all knew the amount that it was to pay in to get the stock. Consequently, the price of each share was ascertainable. This being determined, any amount received on any share in excess of cost was gain in the year of sale. The gain on the purchase and sale, less expenses, amounted to $662,277.60 and dividends amounted to $51,843.50. The respondent has treated as income to each petitioner his pro rata share of such income and dividends. In the case of petitioner Perata, his share amounted to $46,703.52 and he actually received within the year $43,750. The shares and receipts of the others were in proportion to their interests. We see no reason at all why the amount actually distributed was not income to each of the petitioners. There can be no question of the return of capital in these cases because, as set out in the findings, the respondent in calculating the gain has taken into consideration the cost of each share sold and thereby allowed full capital return before computing net income. The respondent has not treated*718 as income any amount with respect to the stock held by the syndicate at the close of the year. Nor do we see any error in the inclusion of income in each case of an amount somewhat in excess of the sum actually distributed *854 to each petitioner within the year. The amount so included in income was each petitioner's distributive share of gain made by the syndicate on the shares of stock purchased and sold within the year plus dividends received by the syndicate within the year. This syndicate was, as petitioners say, a joint venture. As such, its income was their income. ; ; . The facts in these cases distinguish them from the case of . In the Wild case, the syndicate was a continuing enterprise in which the corporate manager was to use the funds to buy and manage securities and for whatever purpose it thought advisable, and the syndicate was to last until the manager ended the venture at its pleasure. Here the syndicate was formed for the limited purpose*719 of aiding the Italo Corporation in the purchase of certain properties and this aid took the form of the purchase of Italo shares and their resale. The life of the venture was limited to one year, with power in the manager to extend it to 18 months. Within the year 1928 it had served its function. It had performed its duty to the Italo Corporation, had received the stock to which it was entitled and had nothing left to do but to distribute and dissolve. Some point is made of the fact that on the books the syndicate owed $33,228.53 at the close of the year. Upon this it is argued that the transactions were not closed in 1928. Opposed to this view is the fact that dividends had been declared by the Italo Corporation on the syndicate stock sufficient to offset this sum. It was obviously intended that the dividends were to be used as an offset, as was formally done in 1929, otherwise the Italo Corporation would not have released the stock to the syndicate in 1928, and the failure of the parties to make book entries can not be said to have kept the transactions open. It is also pointed out that the syndicate manager was entitled to a commission on the profits of the syndicate; that*720 this had not been paid and could not be calculated until the syndicate was completely would up. This is not a sufficient reason for carrying over to a subsequent year the profits actually realized on the purchase and sale of stock in 1928. Cf. . The manager's commission can be calculated on the profits made in 1928. In , where an attempt was made to carry over profits by reason of the failure to make final distribution, the court said: * * * It was not open to the petitioner or his agent, the syndicate or its manager, to avoid the inclusion in his gross income for 1928 of his share of the syndicate's undistributed profits by postponing beyond the end of that year the ascertainment of the exact amount of that share or the actual delivery to the petitioner of the amount of profits to which he was entitled. *855 Wright v. Commissioner (; ; *721 . We therefore conclude that the Commissioner did not err in including in petitioners' gross income their shares of the profits made on the sales of stock and of the dividends, but we can not agree that the amounts reached by the respondent are in all respects correct. A part of this income was composed of dividends, which should be taxed to the members only at surtax rates. Furthermore, the syndicate manager was entitled to a commission of 2 1/2 percent on all income received and disbursed by him. Adjustments should be made for these purposes; otherwise the respondent is affirmed on the issues growing out of the syndicate operations. The dividends in issue in the case of petitioner Rolandelli for the year 1929 are dividends on the same stock as was involved in the case of . In that case, as this, the question was whether such dividends were income in the year 1928 or 1929. Following our holding in the Scatena case, we hold here that the dividends represented by stock of the Bank of America National Association were income to this petitioner in the year 1928. *722 The respondent by affirmative answer has asked that the deficiency for 1928 be increased accordingly in the event it is held that the dividends were income in that year. This will be done on recomputation; and in accordance with the stipulation the profit on disposition of the dividend shares in 1929 will also be adjusted. Decision will be entered in each case under Rule 50. Footnotes 1. Unsold stock. ↩ *. Cost of stock determined as follows: ↩