*267OPINION.
Thammell: This appeal raises the question of the taxpayers’ gain in 1917, 1918 and 1919 from the sale of stock of the Merchants Life and Casualty Co. in 1917. The taxpayer contends that the stock was worth at least as much on March 1, 1913, as it was sold for in 1917, and that no income arose out of the transaction.
The Commissioner contends that the basis for determining gain is the cost of the stock to the taxpayer. The Merchants Life and *268Casualty Co. was organized under the laws of Minnesota in 1908 as a mutual insurance company. The taxpayer, with others, was active in the organization and operation of the mutual company, and at the end of 1912 the company had 12,041 policyholders and a surplus of $43,924.26. At the end of 1913 the number of these policyholders was about the same and its surplus had increased to $63,016.28. On February 2, 1914, the mutual company was changed to a stock company under section 3510 of the General Statutes of Minnesota, 1913. The capitalization of the stock company was 2,000 shares of the par value of $50 each. Nine hundred and eighty-four shares were acquired by taxpayer at a cost of $69,700, $47,700 of which was paid in cash in 1914, and $22,000 of which was money which the taxpayer had advanced to the old mutual company.
The taxpayer, before the sale of the stock, acquired all the stock of the company held by others and included it all in the sale. The cost of the stock, other than that originally acquired in 1914 on the organization of the stock company, is not in issue and we have no evidence with respect thereto.
The taxpayer contends that the fair market value of the stock acquired in 1914 was at least $117.50 per share, that the excess of the market value over cost represented compensation to him for his services to the company prior to 1914 and that, in any event, the March 1, 1913, value was equal to the selling price and that the taxpayer realized no taxable gain or profit in 1917 or subsequent years in connection with the sale of the stock which was issued to him in 1914.
Since the stock company did not come into existence until after March 1, 1913, it is clear that the stock could not have a March 1, 1913, value which could be used as the basis for determining the gain on a subsequent sale thereof. The taxpayer takes the position that the stock was worth more than the cost above mentioned because of the surplus with which the stock company started business. Admitting the surplus to be established, it does not follow that such value increases the cost of the stock. The cost of the stock and the value may be entirely different. As to whether a portion of the value was allowed the taxpayer by the corporation as compensation for services, that is a question of fact. A corporation may and frequently does issue stock for services rendered, or partly for cash and partly for services. In this case any services performed by the taxpayer were rendered to the mutual company before the stock corporation was organized. The assets and liabilities of that company became the assets and liabilities of the stock company. If there was a liability on the part of the mutual company to pay for any services rendered by the taxpayer, such liability followed the assets. The stock company was created merely by an *269amendment of the charter of the existing mutual company. But ive have no evidence of any liability having been set up by the mutual company or the stock company for such services, nor have we any evidence that any liability was canceled by the issuance of stock. The taxpayer has not shown that the corporation was under any legal or moral obligation to pay for any service which he performed. If a portion of the stock thereof was issued for services it is not shown by any corporate act and is not reflected on any of the corporate records. We are unable to reach the conclusion that the stock, or any part thereof, was issued for services of the taxpayer.
The taxpayer doubtless acquired the stock of the corporation at less than its value, but no gain or loss results from buying an article at less than its value until it is realized by sale or other disposition. The taxpayer owned none of the stock prior to March 1, 1913, and as a consequence, the only basis for determining gain or loss on the sale of the stock is cost. Both the cost and the selling price are set out in the findings of fact. The Commissioner determined the taxable gain on the installment basis in proportion as the selling price for the stock was paid, and this method of computation is not in question in this appeal. The initial payment was less than 25 per cent.
Order of redetermination will he entered on 15 days' notice, under Bule 50..