*982 1. Petitioner's evidence fails to establish that it sold stock of another corporation on the installment plan. Respondent's use of the completed transaction basis for computing gain is approved.
2. Assessments paid on stock in a cooperative apartment during the period that petitioner was marketing the stock are not deductible as expenses, but are to be added to the cost of the stock.
*277 The respondent determined a deficiency in income tax for the year 1927 in the amount of $21,977.16. Petitioner alleges that respondent erred in refusing to allow it to use the installment method of computing income from sales of stock of another corporation, and in denying deductions, as ordinary and necessary expenses, for assessments paid on stock while petitioner was selling it.
*278 FINDINGS OF FACT.
Sales of Stock.
Petitioner, a New York corporation, was incorporated in 1926. In that year it purchased a tract of land in New York City known as "Nos. 46 to 62, inclusive, East 75th Street."
On October 21, 1926, petitioner*983 entered into an agreement with another corporation, the 812 Park Avenue Corporation, hereinafter called the owner, whereby petitioner agreed to convey the land to the owner and erect thereon an apartment house, for which petitioner was to receive stock of the owner. It was further agreed that petitioner would sell the stock of the owner under a plan whereby the purchaser of a block of the stock would receive a 99-year proprietary lease on a designated apartment in the building. Under a form of subscription agreement made a part of the contract between petitioner and the owner it was provided that purchasers of stock would pay the purchase price in eight installments of 10 percent each and one of 20 percent, which were to be made as construction of the building progressed, the final installment of 20 percent to be paid when a certificate of occupancy of the building was issued by the proper municipal authorities.
In 1926 and 1927 petitioner constructed the apartment house in accordance with the contract and received 20,100 shares of no par capital stock of the owner. The building contained 35 apartments. The cost of the stock to petitioner was $67.20 per share.
During 1927*984 petitioner sold 10,290 shares of the stock of the owner under 22 subscription agreements, none of which were in exact accord with the plan originally contemplated in that the payments were not made in the nine installments proposed in the contract between petitioner and the owner. Of the 10,290 shares sold in the taxable year, 3,090 shares were sold under six subscription agreements for an aggregate of $309,000, all of which was paid in installments within the year 1927. Under 15 of the 22 subscription agreements petitioner sold 6,570 shares of stock, the net amount of which and the cash paid in 1927 are as follows:
| Contract | Date | Shares | Net price | Cash paid in 1927 |
| 1 | Mar. 25 | 200 | $20,000 | $5,000 |
| 2 | May 23 | 270 | 27,000 | 16,200 |
| 3 | May 23 | 850 | 81,000 | 56,200 |
| 4 | June 8 | 280 | 28,000 | 2,500 |
| 7 | June 23 | 660 | 66,000 | 59,800 |
| 8 | July 21 | 370 | 37,000 | 3,500 |
| 11 | Aug. 15 | 420 | 42,000 | 8,400 |
| 12 | Aug. 24 | 800 | 80,000 | 25,000 |
| 13 | Aug. 29 | 10 | 1,000 | None. |
| 15 | Oct. 14 | 200 | 19,000 | 6,000 |
| 18 | Nov. 11 | 510 | 51,000 | 10,000 |
| 19 | Nov. 16 | 380 | 38,000 | 10,000 |
| 20 | Nov. 21 | 360 | 28,000 | 2,000 |
| 21 | Nov. 29 | 520 | 50,000 | 10,000 |
| 22 | Dec. 19 | 740 | 74,000 | 9,000 |
| Total | 6,570 | 642,000 | 223,600 |
*985 *279 Under the other subscription agreement, No. 16, the subscriber received from petitioner 630 shares of stock and $18,000 in cash in exchange for a parcel of real estate subject to a mortgage of $30,000. The real estate was deeded to petitioner subject to an option in the subscriber to repossess the property upon payment to petitioner of $83,000 at any time on or before June 1, 1928. The subscriber agreed to pay taxes, insurance, mortgage interest and maintenance charges on the real estate until February 1, 1928, and petitioner agreed to pay assessments against the 630 shares of stock until the same date. Petitioner agreed to insure the household furniture on the property at its expense, and not to lease the property prior to June 1, 1928.
The total gross contract price of the 10,290 shares of stock subscribed for in 1927 was $1,029,000, against which allowances of $15,316.53 were made, leaving a net contract price of $1,013,683.47. Total cash received on the subscriptions in 1927 was $532,600, which was 52.54 percent of the net contract price.
In addition to the cash paid by subscribers, petitioner received during 1927, on account of the sale of the 10,290 shares*986 of stock, the following:
| Promissory notes of the purchasers in the face amount of | $130,300 |
| Bond secured by second mortgage on real estate | 10,000 |
| Bond secured by second mortgage on real estate, together with collateral bond of purchaser in face amount of | 20,000 |
| Real Estate located in Yorktown, N.Y. (subject to a mortgage of $18,000), at an agreed value of | 110,345 |
(This is the property mentioned above in connection with the sale of the block of 630 shares)
Assessments on Stock.
Under the contract between petitioner and the owner it was provided that the funds needed to amortize the mortgage on the property, to pay mortgage interest, taxes, and maintenance and operating expenses were to be raised by periodical assessments on the stockholders in proportion to their stock holdings. Under that agreement petitioner during 1927 paid assessments on stock amounting to $14,739.80, of which $4,341.20 was paid on shares sold in that year.
OPINION.
ARUNDELL: Petitioner contends that in selling the stock of the corporate owner of the apartment house it regularly sold personal property on the installment plan, hence it is entitled to report income from such*987 sales on the installment basis prescribed in section 212(d) of the Revenue Act of 1926. The material part of the *280 statute is set out in the margin. 1 Petitioner reported income from the sale of stock on the installment basis, using as basic figures the cash received, $532,600, and the net contract sales price of the 10,290 shares in the amount of $1,013,683.47. The fraction represented by these figures, 532,600/1,013,683.47, it applied to the profit of $322,195.47 and thus computed a taxable profit for 1927 of $169,281.50. There is no dispute as to the profit figure of $322,195.47. The respondent treated the entire profit, less a discount of $4,500 on second mortgages, as taxable in 1927. In so doing he included in income the promissory notes of purchasers at full face value, mortgages receivable at 85 percent of face value, accounts receivable in the amount of $255,755, and real estate received for stock at $80,345, which is stated to be appraised value less a mortgage of $30,000 We may say in passing that the pleadings raise an issue as to the values attributed by respondent to the notes, mortgages, accounts receivable, and real estate, but no evidence whatsoever*988 was introduced by petitioner to show error in this respect. Respondent's position is that the sale of stock was a single venture and petitioner was not engaged in regularly selling on the installment plan.
There is no evidence that petitioner ever engaged in any other project similar to the one described in the findings, and so the question must be decided entirely on the facts as they are shown in connection with the sale of stock of the one corporation. The statute limits the use of the installment basis to those persons who "regularly" sell "on the installment plan." The statute does not define the term "regularly", but the respondent's regulations have consistently employed the phrase "dealers in personal property" as descriptive*989 of the class to whom the installment provisions apply. We strongly doubt whether the acquisition and sale of one lot of personal property can properly constitute one a dealer in such property. The term rather applies to those who engage continuously in such an activity. The installment plan of returning income is intended for use where the purchaser extends his payments into at least one year following that of the sale. Obviously if all installments are paid up in the year of sale there is no occasion for applying the installment method of computing profit, as it is all realized within the year. The evidence here leaves considerable doubt as to whether petitioner operated on the installment plan as that term is commonly understood. It is stipulated that petitioner erected the apartment house "in 1926 and 1927", which, we take it, means that it was completed *281 and ready for occupancy in the year 1927. Ten of the twenty-two subscription agreements provided for payment of the last installment upon issuance of a certificate of occupancy, and as to these it must be assumed that full payment was contemplated within 1927 when the building was completed. Six of the group*990 of ten were actually paid up in full in 1927 and these involved 3,090 shares. Another subscription agreement for 630 shares became a closed transaction within the year when the purchaser deeded real estate to petitioner for the stock. In other cases bonds secured by mortgages were given covering the deferred payments, and in one case the purchaser contracted to deliver to petitioner stock of another corporation and a lease on another apartment. Whether such property was accepted in payment or only as evidence of indebtedness, the acceptance of it by petitioner does not accord with the usual method of doing business on the installment plan. As we understand it, a dealer on the installment plan usually carries the deferred payments on open account or on notes of the purchasers sometimes secured by chattel mortgages on the property sold. Upon the evidence we are not convinced that petitioner, in selling the stock here involved, may properly be classified as one regularly selling on the installment plan and we affirm the respondent's erfusal to compute income on the installment basis.
The other question has to do with the amount of $14,739.80, representing assessments paid by petitioner*991 in 1927 on the stock of the corporate owner of the apartment property. Of this sum $4,341.20 was paid on stock sold in 1927. Petitioner contends that the entire sum is deductible as an ordinary and necessary business expense.
It has been repeatedly held that assessments paid on stock of national banks are not deductible by the stockholders but are contributions to capital. ; ; ; aff'd., . We see no reason for applying a different rule here. Petitioner claims that in effect it was acting as agent for the sale of the property owned by 812 Park Avenue Corporation and that, following the holding in , it should be allowed to deduct the assessments as part of the selling expense of the property. We fail to see the claimed analogy between the two cases. Petitioner was selling only the stock that it owned in the corporate owner of real estate. As a stockholder it was liable for stock assessments, which in our opinion, under the cases above cited, constitute additional cost*992 of the stock to be taken into account on the sale or other disposition. Counsel for respondent concedes that an adjustment should be made on account of the $4,341.20 paid on stock sold in 1927. This sum will be added to cost in the recomputation.
Decision will be entered under Rule 50.
Footnotes
1. SEC. 212. (d) Under regulations prescribed by the Commissioner with the approval of the Secretary, a person who regularly sells or otherwise disposes of personal property on the installment plan may return as income therefrom in any taxable year that proportion of the installment payments actually received in that year which the total profit realized or to be realized when the payment is completed, bears to the total contract price. * * * ↩