1926 BTA LEXIS 2845">*2845 The taxpayer was the owner during the taxable year of stock of a subsidiary which had cost $31,980.38 and was sold to stockholders of the parent (affiliation continuing) for $85,000. The Commissioner computed a profit on this transaction. Held, that the sale made under the circumstances set forth did not give rise to taxable gain.
5 B.T.A. 529">*529 This is an appeal from the determination of a deficiency in income and profits taxes for the year 1919 in the amount of $9,165.60. The petitioner alleges error in the determination of a profit upon the sale of the stock of a subsidiary corporation, the Oklahoma Union Railway Co.
FINDINGS OF FACT.
The petitioner is an Oklahoma corporation with its principal office at Tulsa. During the taxable year it was affiliated with the Oklahoma Union Railway Co., the Sapulpa Interurban Electric Railway Co., and the Park Addition Co. At the beginning of the taxable year 1919 the petitioner was the owner of all of the outstanding capital stock of the Oklahoma Union Railway Co. in the amount of 5,250 shares. During1926 BTA LEXIS 2845">*2846 that year the petitioner sold 1,750 shares of the stock of the Oklahoma Union Railway Co., which it owned, to certain individuals, who were stockholders of the petitioner, for the amounts and on the dates indicated below:
| Date of sale. | Purchaser. | Shares. | Amount. |
| Jan. 23, 1919 | G. C. Stebbins | 125 | $5,000 |
| Do | F. C. Giddings | 125 | 5,000 |
| July 31, 1919 | G. C. Stebbins | 200 | 10,000 |
| Do | J. S. Cosdin | 200 | 10,000 |
| Do | E. W. Sinclair | 200 | 10,000 |
| Nov. 11, 1919 | do | 300 | 15,000 |
| Do | J. S. Cosdin | 300 | 15,000 |
| Do | G. C. Stebbins | 300 | 15,000 |
| 1,750 | 58,000 |
5 B.T.A. 529">*530 The cost of the stock so sold was $31,980.38.
The Commissioner computed the profit upon the above transaction to be the difference between $31,980.38 and $85,000. The Commissioner did not increase the petitioner's consolidated invested capital on account of the sale and issuance of the above-mentioned stock. The entire stock owned by the petitioner in the Oklahoma Union Railway Co. was acquired by it in the year 1917 in consideration of the construction of that railway.
OPINION.
LITTLETON: Our decision of the issue involved in this appeal is governed by the decision of the Board in1926 BTA LEXIS 2845">*2847 the . Upon the authority of that decision, it is held that no taxable gain was realized by the petitioner from the sale of the stock of the Oklahoma Union Railway Co., and the Commissioner's determination of the deficiency, in so far as it resulted from the inclusion of a profit of $53,019.62 upon the sale of the stock, was erroneous.
Judgment will be entered on 15 days' notice, under Rule 50.