Respondent has determined a deficiency against petitioner for the calendar year 1924 in the amount of $1,038.34. The only error alleged is that respondent has determined that petitioner and McCawley & Co. were not affiliated during the calendar year 1924 within the meaning of section 240 of the Revenue Act of 1924.
FINDINGS OF FACT.
Petitioner is a Maryland corporation with principal offices in Baltimore.
During the year 1919 the board of directors, and also the stockholders, of McCawley & Co. approved and passed the following resolution:
Resolved: That it is the sense of the Directors of the Company that from and after January 1, 1920, employees of the Corporation, while they continue to be such, should be given an opportunity to participate in the earnings of the Company by being permitted to purchase, at par, at certain times, to be hereafter fiked by the Board of Directors, shares of the common stock of the Company; and that the number of shares to be held by any one employee of the Company shall be hereafter fixed (subject to the further order of the Board of Directors) and that all such stock to be subscribed and paid for by employees should be issued upon condition that the termination of the employment of such employee by death, resignation or discharge would cause the stock then held by such employee to revert to the Company at its par value, with interest at six per cent per annum from the last dividend day, and that the Beard of Directors shall have the power to indicate what portion of said stock and which particular shares are to be issued upon the conditions mentioned, and which are not.
On January 2, 1920, McCawley & Co. entered into the following agreement with Basil D. Hall, one of its employees:
*134I, Basil D. Hall, now an employee of McCawley & Company, Incorporated, have received of McCawley & Company, Incorporated, Certificate No. 32 for 10 shares of its capital stock, which stock and certificate is issued and is to be held by me upon the following terms and conditions:
In consideration of the issuance and delivery of said certificate to me, I agree that:
In the event of my death or in the event that, for any reason my employment by McCawley & Company, Incorporated, is terminated (whether voluntarily or involuntarily), the said Company shall have the right to purchase said stock and hereby agrees to do so for cash, to be paid within ten days of said purchase, at par, and interest at 6% per annum from the date of the declaration of the last dividend on said stock, and I hereby agree to endorse said stock for transfer to the corporation at the price hereinbefore provided for and the foregoing conditions are to bind me as well as my personal representatives.
My acceptance of said stock certificate and the signing of this receipt are to be taken as conclusive evidence of my acceptance of the conditions hereinbefore stated.
McCawley & Company, Incorporated, hereby binds itself to pay for the stock above mentioned upon the conditions and at the price and within the time herein set forth.
Pursuant to the above agreement McCawley & Co. issued to said Hall a certificate in words and figures as follows:
Number 32 Shares 10
Incorporated under the laws of the State of Maryland McCawley and Company, Incorporated Capital Stock $1,000,000.00
This certifies that Basil D. Hall is the owner of Ten shares of one hundred dollars each of the capital stock of McCawley and Company, Incorporated, transferable only on the books of the Corporation in person or by Attorney on surrender of this Certificate properly endorsed.
In Witness Whereof, the Corporation has caused this Certificate to be signed by its duly authorized officers and its Corporate Seal to be hereunto affixed at Baltimore, Md., this Second day of January, 1920.
On the back of said certificate is the usual transfer form and the following endorsement:
The shares of stock represented by this certificate are held and ■ the ownership and transferability thereof are subject to the provisions of an agreement between the person named as holder of this certificate and McCawley and Company, Inc., dated January 2, 1920, and the said shares of stock are subject to all the terms and conditions in said agreement.
Subsequent to the year 1919 McCawley & Co. issued further shares of its capital stock to its employees so that at the close of the year 1923 there were issued and outstanding in the possession of the hereinafter named employees a total of 379 shares represented by certificates, each of which was identical in all respects with the one issued *135to Hall and each of which was accompanied by an agreement identical in all respects with the one issued to Hall, namely:
Employee Shares
John W. Diggs_:_255
Daisy Montague_ 6T
D. E. Williams, Jr_ 57
B. D. Hall_ 10
379
At the close of the year 1924 as well as at the beginning and throughout said year the capital stock of McCawley & Co. and the capital stock of petitioner were held as follows:
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The stock of petitioner and of McCawley & Co. was owned by the same interests and said corporations were affiliated during 1924.
Reviewed by the Board.
Decision will be entered under Rule 60.
Smith and Murdock dissent.