*198OPINION.
Trammell:The taxpayer claims the right to deduct the entire amount of $22,688.74, which is the value of the securities it transferred to Hyman Kohn in the taxable year in question in considera*199tion of his agreeing to transfer to Samuel and Mark Kohn the shares of stock referred to in the statement of facts. It is claimed that this amount was compensation for services of said employees which was required to be paid during the taxable year. It appears, however, that the value of securities which the corporation turned over to Hyman Kohn during that year was in consideration of what Hyman Kohn was to pay out over a period of seven years. The substance of the transaction was that the corporation paid the above amount as consideration for acquiring the right in and the equitable title to the shares which Hyman Kohn transferred to the two employees. When Hyman Kohn paid out the securities each year he did so as trustee for the corporation which had the equitable title to the said securities in view of the fact that it had paid a valuable consideration therefor, that is, securities of the value of $22,688.74. The par value of the stock which was distributed to the employees is not material. A corporation is allowed to deduct a reasonable compensation which it is necessary to pay for services actually rendered. What the corporation paid for those services was the value of the stock which Hyman Kohn turned over to the employees for the corporation. Hyman Kohn, however, did not actually pay out or turn over to the employees the stock during the taxable year in question, but under the terms of his agreement he was required to do so over a period of seven years. The equitable ownership of the said stock changed from Hyman Kohn to the corporation and he held it for the corporation. The corporation is entitled to a deduction on account of the salaries paid in capital stock at its value at the time of payment.
What might have been the effect if one of the employees had died and the stock had been paid over to his heirs or legal representatives is not necessary to decide, since such an event did not occur. It is sufficient to say that unless such stock had been paid out or the right to receive it had accrued in favor of the employees, the corporation would not be entitled to a deduction on account thereof. The securities which the corporation gave up were exchanged for the purpose of acquiring the stock which was to be paid for services. Instead of the corporation, however, actually receiving such stock itself, in its own name, it permitted Hyman Kohn to distribute it for the services rendered to the corporation.
For the foregoing reasons it- is the opinion of the Board that the taxpayer is not entitled to the deduction claimed in the year in question, but that it is entitled to deduct the amount of salaries paid in capital stock at its value at the time of payment.