*328OPINION.
Tettssell :1. Respecting the two motions made on behalf of the petitioner at the trial and made a part of the record for consideration with the final disposition of this case, it must be observed that during the year 1920 the Clinchfield Coal Corporation was an existing and apparently going concern. It seems to be admitted that during that year this company had some income’and profit, although the petitioner contends that such income and profit were in amount much less than the volume of dividends paid. No evidence was introduced or offered at the trial respecting the amount of income and profits enjoyed by the corporation or the total amount of dividends paid, although petitioner’s counsel argued that such evidence could be found in an alleged deficiency letter sent by the respondent to the Clinchfield Coal Corporation, a copy of which was claimed to be attached to pleadings in an action pending before the Board under Docket No. 16594. Even though such a deficiency letter may exist, and a copy thereof be in the files of the action mentioned, we are of the opinion that such letter could not be taken as proof of anything contained in said letter. It only sets forth what the respondent may or may not have done. The answer may or may not deny all allegations of fact which petitioner sets up based upon said letter and at any event is only evidence of a determination of a deficiency and the basis used in such determination but is not proof in itself of facts in controversy. The two motions made on behalf of the petitioner, as hereinabove described, are, therefore, denied.
The record shows that the Clinchfield Coal Corporation was, during 1920, a going concern; that it paid dividends in the ordinary *329course of business, and, in the absence of convincing evidence to the contrary, it must be found, and we so hold, that the dividends received by this petitioner from the said corporation during 1920 constitute taxable dividend income.
2. The record herein shows that 193 shares of stock of the Carolina, Clinchfield & Ohio Ky. Co., which petitioner sold at a loss in the year 1920, were acquired in July, 1916, together with an additional one-third fractional share in exchange for stock of the Cumberland Corporation, which he had acquired prior to March 1, 1913, at a cost of $20,000; that the remaining seven shares of the stock sold in 1920 were acquired on July 5, 1916, at a cost of $452.38, the equivalent of $64.50 per share. The fractional one-third share received in the exchange was sold on July 3, 1916, for $21, the equivalent of $63 per share. The Cumberland Corporation stock, which figures in this exchange, had been acquired a long time prior to 1913. From the record we are of the opinion that the basis for determining the loss sustained by the petitioner in 1920 from the sale of the railway stock may properly be its market value on the date that such stock was acquired. The only evidence of such market value is the sale of the one-third fractional share at the rate of $63 per share and the purchase of seven shares at the rate of $64.50 per share. We are of the opinion that the buying price of the seven shares is a truer index of market value than the selling price of the fractional share, and that the loss sustained by the petitioner from this transaction should be the difference between the amount of 200 shares at $64.50 per share and the selling price in 1920.
3. The funding notes of the Atlantic & Birmingham Construction Co. were acquired by this petitioner in exchange for money advanced by him, in association with other interested parties, for the purpose of protecting their prior investments in the stock and notes and indentures previously issued by said company. To our mind these funding notes, therefore, stand more in the nature of additional investments than in the nature of debts. Begarding the book entry of December 30,1916, we are of the opinion that the said entry may be disregarded so far as the issues of this action are concerned. The notes were not worthless on that date as there stood back of them, or part of them, collateral securities from which approximately $97,000 of cash was later realized.
The respondent found that the portion of these funding notes which was issued and acquired by the petitioner prior to 1913 had a value on March 1, 1913, equivalent to 20 per cent of par. And, we are of the opinion that the record supports that finding of value. It therefore follows that on March 1, 1913, the petitioner owned Atlantic & Birmingham Construction Co. funding notes of a then *330value of $5,267.64; that he thereafter acquired the same company’s funding notes of 1915 at a cost of $7,955.35; and that he ultimately realized in the year 1920, upon these investments, the amount of $1,310.33. We are, therefore, of the opinion, and so hold, that the petitioner’s net income for the year 1920 as determined by the respondent should be further reduced by the deduction of a loss on account of the so-called funding notes of 1915 in the amount of $7,955.35.
The deficiency may be redetermined for the year 19W in accordance with the foregoing findings of fact and opinion upon 15 days’ notice, pursuant to Bule 50, and judgment will be entered in due course.