*898OPINION.
Sternhagen :Is the taxpayer’s invested capital to be computed under section 326 of the Revenue Act of 1918 upon the theory that $3,499,000 par value of its original capital stock was issued on January 18, 1907, in payment for tangible property consisting of capital stock of the three predecessor corporations the value of which is conceded to be no less than the par value of the taxpayer’s stock then issued; or upon the theory that the taxpayer’s stock was issued for the corporate assets of the three predecessor corporations, which assets concededly included intangibles having a value of $2,499,000?
„The facts are not in dispute. On January 18, when the stock of the taxpayer was originally issued, the property paid in therefor consisted of the capital stock of the other corporations. The transaction was with the Corporate Organization & Audit Co., a perfunctory intermediary which had formally offered to deliver the stock of the throe corporations to the taxpayer in exchange for its newly issued capital stock. Nothing was said about the corporate assets and the transaction contemplated was an issuance of stock for stock. Section 325 of the statute expressly defines tangible property to include stocks, and in its definition of intangible property it excludes stocks. When, therefore, stocks were bona fide paid in on January 18, 1907, for stock of the taxpayer, they must be regarded, in accordance with the statutory definition, as tangible property bona fide paid in for stock or shares within the express language of section 326 (a) (2). The statute in this respect is clear and unambiguous and there is no room for construction to turn the tangible property consisting of the stocks into intangible property which lies behind the stock.
*899This definition by Congress, treating stocks as tangible property independent of the corporate assets which they represent, was no violent departure from the usual commercial treatment of stocks. This was recognized by the Supreme Court in DeGanay v. Lederer, 250 U. S. 376, in which Mr. Justice Day said:
A learned argument is made to the effect that the stock certificates, bonds and mortgages are not property, that they are but evidences of the ownership of interests which are property; that the property, in a legal sense, represented by the securities, would exist if the physical evidences thereof were destroyed. But we are of opinion that these refinements are not decisive of the congressional intent in using the term “ property ” in this statute. Unless the contrary appears, statutory words are presumed to be used in their ordinary and usual sense, and with the meaning commonly attributable to them. To the general understanding and with the common meaning usually attached to such descriptive terms, bonds, mortgages, and certificates of stock are regarded as property. By state and federal statutes they are often treated as property, not as mere evidences of the interest which they represent.
It is now too late to say that the stock received was not property but that it was merely the indicia of ownership of the corporate property, and that hence what was paid in for the taxpayer’s stock on January 18, 1907, was the aggregate of the corporate assets, tangible and intangible. Congress has in several respects throughout the revenue acts made it clear that the ownership of capital stock is to be treated as direct ownership of the stock and not indirect ownership of the corporate assets. Were this not so a liquidation distribution of such corporate assets among the stockholders could not result in gain or loss as it has been uniformly treated under the Revenue Act of 1918 and earlier acts. The decisions in United States v. Phellis, 257 U. S. 156, and in Gullinan v. Walker, 262 U. S. 134, are founded upon the doctrine that stock and corporate assets are not identical. It is upon the same principle that this Board decided Huffman's Appeal, 1 B. T. A. 52, Greenwood's Appeal, 1 B. T. A. 291, and Buchmiller's Appeal, 1 B. T. A. 380. We need not dwell upon the well recognized distinction between a corporation and its stockholders, nor repeat what so frequently has been said to the effect that the ownership by a corporation is not the ownership of its stockholders, and that the rights and liabilities of the former are separate from those of the latter. A corporation is not a mere form; it is a substantial legal being whose existence, rights and obligations are matters of substance, the recognition of which has permeated the entire economic existence of the Nation, and neither the Government nor the taxpayer will be heard in a bona fide case, except in extraordinary circumstances, to say that it is a mere fiction to be lightly disregarded. Cannon Mfg. Co. v. Cudahy Packing Co., 267 U. S. 333.
It is true that, with the complete ownership of the stock of the three predecessor corporations, the taxpayer had an undisputed right to control the corporate assets, but the fact nevertheless remains that in contemplation of law this was an inchoate ownership only and could be exercised only by properly voting the stock and in all other respects keeping the property subject to the obligations of the corporations by which it was owned. It might, of course, so long as it was the sole owner of the capital stock, have liquidated the corporation and thus come into possession and direct ownership *900of the assets as it later did; but the fact remains that it did not do so. We said in Harkness’ Appeal, 1 B. T. A. 127, 130:
It seems to us to be fundamentally unsound to determine income tax liability by what might have taken place rather than what actually occurred. Even though the practical effect may be the same in either case, the resulting tax liability may be quite different.
This is equally true now in favor of this taxpayer as then in favor of the Government.
Our attention is called to the subsequent action of the taxpayer 13 days after the acquisition of the stock, whereby it merged or liquidated the corporations and thus became the direct owner of the intangible property, and to the statement in the minutes that the capital stock then being liquidated had theretofore been acquired “ with the intent of taking over the assets, assuming the liabilities, and carrying on the business of said Regal Shoe Co., Inc.” It is said that the acquisition of the stock was merely a step in the acquisition of the assets, and from this it is argued that the intermediate step should be disregarded and the transaction looked at as a whole-as an issuance of stock for assets.
It is undoubtedly true, as appears from the resolution of January 31, 1907, that the taxpayer at all times intended to acquire the business and assets of the three predecessor corporations, but the fact is that before it acquired these assets it had acquired the stock which the statute characterizes as tangible property, and the assets were acquired not for the stock of the taxpayer company but in liquidation of the stock of the other three corporations which it held. The one transaction was just as important and legally real as the other. During a 13-day period the ownership of the stock and of the assets was in different legal hands, and the practical and legal incidents of such ownership were different. United States v. Phellis, 257 U. S. 156. This is clear from the fact that at the time of the liquidation the assets received were worth more than the price previously paid for the stock. If the provisions of the 1918 Act had been in effect in 1907, no one would dispute the right of the Government to impose a tax upon the gain represented by the difference between the price paid and the amount received in liquidation, namely, the increase in actual value of the assets received in liquidation over the actual value of the stocks at the time the taxpayer acquired them for its own stock; and this would be true irrespective of the length of time which elapsed between acquisition of the stock and the subsequent liquidation thereof and receipt of the assets.
We must, therefore, hold that the subsequent expression of original intent can not convert the fact of stock issued for stock into a transaction of stock issued for tangible and intangible corporate assets. We must give heed to the statement of the Supreme Court in United States v. Phellis, 257 U. S. 156, that “ in such matters, what was done, rather than the design and purpose of the participants, should be the test.” In Bickley's Appeal, 1 B. T. A. 544, which is cited in support of the view that the acquisition of stock on January 18 was not a complete transaction, this Board considered all of the facts and decided the appeal upon what was done rather than upon what was said to be done. The assets in that case were said to be transferred to the individuals; in fact they were not transferred and did not become the property of the taxpayer in law or in fact, and hence that decision is not authority here.
*901That the Board will look behind the outward appearance of a situation and be guided by its substantial nature is apparent from the decisions in Bradley's Appeal, 1 B. T. A. 111, Ames’ Appeal, 1 B. T. A. 63, and Mitchel's Appeal, 1 B. T. A. 143; and, if the Board should be asked to countenance a tax evasion accomplished through the adoption of forms amounting to a subterfuge, it will have no hesitation in refusing; to do so. Here there is no such situation. The transactions in question took place before an income tax could constitutionally be imposed and an excess-profits tax involving invested capital was not remotely contemplated. There is no suggestion of a lack of good faith.
Reference is made by the parties to article 868 of Regulations 45, which has to do with the consolidated invested capital of corporations affiliated within the meaning of the Revenue Act of 1918. There is here, however, no question of affiliation or consolidated returns, and we do not, therefore, regard this article as material. It would be obviously improper for us to discuss that article in a case to which it is not applicable.
We hold, therefore, that on January 17 and 18, 1907, there was $3,500,000 of cash and “ actual cash value of tangible property other than cash bona fide paid in for stock or shares ” of the taxpayer and that this amount is therefore properly to be included in the taxpayer’s invested capital.
Teammell took no part in the consideration or decision of this appeal.