*798 A corporation in 1933 adopted a plan of reorganization under which a part of its assets were to be transferred to a new corporation for all of the stock of the latter and the new stock was to be distributed pro rata to its stockholders. In that year the assets were transferred to the new corporation by a bill of sale and the old corporation adopted a resolution authorizing payment on August 15, 1933, of a dividend of the new stock to its stockholders. The petitioner stockholders, who accounted for their income on the cash basis, did not receive certificates for their shares of the new stock until March 1934. Held, that the petitioners became the owners of, and acquired complete dominion and control over, the new stock on August 15, 1933, and hence the dividend may not be taxed to them in the year 1934 under section 115 of the Revenue Act of 1934 and article 112 (g)-5, Regulations 86.
*925 The Commissioner determined deficiencies in income tax of the petitioners as follows:
| Petitioner | Docket No. | Year | Deficiency |
| 1934 | $2,559.30 | ||
| Edmund I. Kaufmann | 97157 | 1935 | 1,096.13 |
| Marcus S. Goldnamer | 97158 | 1934 | 87.32 |
| Jeanette Levi | 97159 | 1934 | 6,582.54 |
| Helen Goldnamer | 97160 | 1934 | 67,298.30 |
| Saul Kaufmann | 96161 | 1934 | 17,545.02 |
| Lillian S. Kaufmann | 97162 | 1934 | 82,521.84 |
*799 The proceedings are consolidated. They arise as the result of a transfer of property of the E. M. Rosenthal Jewelry Co., a corporation, to a new corporation for all of the stock of the latter and the distribution of such stock to the petitioners as shareholders of the Rosenthal Co. The primary question involved is whether the stock of the new corporation was distributed in 1933, prior to the taxable year, or whether it was distributed in the taxable year 1934 and is taxable to the petitioners in the latter year as a dividend under section 115 of the Revenue Act of 1934. Other questions raised are the fair market value of the stock of the new corporation as of March 1934, and the amount of the earnings and profits accumulated by the Rosenthal Co. after February 28, 1913, and existing in March 1934, but such other question require consideration only in the event that we find the stock to have been distributed in 1934.
Edmund I. Kaufmann, in his petition, complains of the disallowance of deductions claimed for interest and taxes alleged to have been paid during 1934 and 1935. He has produced no evidence and presented no argument respecting those items, and his claim for the deduction*800 thereof is accordingly considered as having been abandoned.
FINDINGS OF FACT.
Edmund I. Kaufmann and his wife, Lillian S. Kaufmann, and Marcus S. Goldnamer and his wife, Helen Goldnamer, residents of *926 the District of Columbia, filed Federal income tax returns for 1934 in the district of Maryland. Saul Kaufmann, a resident of Reading, Pennsylvania, and Jeanette Levi, a resident of Rochester, Indiana, filed Federal income tax returns for 1934 in the first district of Pennsylvania and the district of Indiana, respectively. Each of the foregoing prtitioners was on the cash receipts and disbursements basis and filed returns on that basis for the taxable year 1934 and for the year 1933.
The E. M. Rosenthal Jewelry Co. (hereafter referred to as Rosenthal Co.), a corporation of the District of Columbia, was organized in 1923, with an authorized capital stock of $150,000, consisting of 1,500 common shares of the par value of $100 per share. It was organized by members of the Kaufmann, Goldnamer, and Rosenthal families (to which all petitioners except Jeanette Levi belong) and Albert J. Levi, and it has ever since its organization carried on a business of wholesale dealer*801 in jewelry. From January 1, 1933 to March 31, 1934, and for some time thereafter, the 1,500 shares of stock of the Rosenthal Co. were outstanding and were owned as follows:
| Edmund I. Kaufmann | 1 |
| Lillian S. Kaufmann | 449 |
| Marcus S. Goldnamer | 1 |
| Helen Goldnamer | 374 |
| Saul Kaufmann | 150 |
| Edwin M. Rosenthal | 1 |
| Ester L. Rosenthal | 299 |
| Estate of Albert J. Levi | 225 |
| Total | 1,500 |
The shares owned by Levi's estate were held by it in trust for the benefit of petitioner Jeanette Levi and others.
Edmund I. Kaufmann has been president and Goldnamer has been secretary-treasurer of the Rosenthal Co. since 1923. They controlled the affairs of the corporation, but Goldnamer along managed the business and devoted his entire time to the operation thereof, Kaufmann collaborating with him in regard to the policies followed by the company.
During the years 1923 to 1929, the Rosenthal Co. organized numerous corporations which owned and operated retail jewelry stores under the name of Kay Jewelry Co., in various cities throughout the United States. The Rosenthal Co. acquired most of the stock of those corporations at the time of their respective organizations and the remainder*802 was purchased by managers or others employed in the stores. The stores purchased most of their merchandise from the Rosenthal Co. and sold about 95 percent of it on the installment plan. Goldnamer was an officer and a director of each retail corporation. He purchased its merchandise and store fixtures, hired its manager, and exercised supervision over the conduct of its business and over its installment accounts.
*927 Because of its ownership of stocks of the retail stores, the Rosenthal Co. in the latter part of 1932 or the first part of 1933 began to experience difficulty in obtaining the discount usually allowed to wholesale dealers in jewelry. Many manufacturers declined to allow it the full amount of the wholesalers' discount and criticized it for holding itself out as a wholesale dealer. For this reason, and also because of the fact that it was advised by its attorney that its ownership of stock in other corporations was prohibited by the laws of the District of Columbia, Goldnamer believed that it would be to the best interest of the Rosenthal Co. to divest itself of ownership of the stocks of the retail corporations and certain other assets not essential to the*803 conduct of the wholesale jewelry business. Because of this situation Goldnamer, Kaufmann, and Rosenthal, who together with his wife, Ester L. Rosenthal, were large stockholders in Rosenthal Co., planned in January 1933 that such stocks and assets should be transferred to a voting trust for the benefit of the stockholders of the Rosenthal Co. Arthur Fertig & Co., of New York, New York, accountants for the Rosenthal Co., informed Goldnamer that the planned transfer of the stocks and assets to a voting trust would subject the stockholders of the Rosenthal Co. to liability for Federal income tax, and the plan for such transfer was abandoned. In April 1933 the accountants recommended a course of procedure which, they stated, would effect a segregation of the Rosenthal Co.'s ownership of the stocks of the retail corporations from its other assets which were necessary for the operation of its wholesale business and would, at the same time, leave the control of such retail corporations' stocks in the hands of the stockholders of the Rosenthal Co. without any resulting liability for Federal income tax. After receiving the recommendations from their accountants Goldnamer and the other stockholders*804 of the Rosenthal Co., upon consultation with their attorney, decided on a plan under which the stocks of the retail corporations and certain other assets of the Rosenthal Co. would be transferred by it to a new corporation to be organized for the entire capital stock of 1,500 shares of the new corporation and cash in the amount of $19,892.29; and that the stock of the new corporation should be forthwith distributed pro rata to the stockholders of the Rosenthal Co.
In May 1933, in pursuance of the above plan, Goldnamer and the other shareholders in the Rosenthal Co. organized a corporation under the laws of Delaware, with the name of "General Associates, Incorporated" (hereinafter referred to as Associates). Associates had an authorized capital stock of $150,000, consisting of 1,500 common shares of the par value of $100 per share. Edmund I. Kaufmann has been president and Goldnamer has been secretary-treasurer *928 of Associates at all times since its organization. At that time the Rosenthal Co. owned stock in 15 retail jewelry corporations referred to above as being operated under the name of Kay Jewelry Co. It owned common stock of eight of them ranging from 53 to 96*805 percent of the total common stock outstanding, common stock of five of them ranging from 28 to 48 percent of the total common stock outstanding, and common stock of two of them ranging from two to 10 percent of the total common stock outstanding. In addition, it owned a substantial part of the preferred stock of five of the only six of those corporations having preferred stock. All of the retail corporations were going concerns in 1933 and the common and preferred stocks which the Rosenthal Co. owned had been acquired by it at an aggregate cost of $294,106, and were carried on its books at cost in an "Investments" account. The Rosenthal Co., in May 1933, also owned promissory notes of the aggregate face value of $49,826.08, most of which were secured notes of the Kay Jewelry companies. The notes had been acquired by the Rosenthal Co. at a cost equal to their face value, and they were carried on its books at cost.
On July 21, 1933, the Rosenthal Co., in further pursuance of the plan, submitted to Associates an offer in writing to sell the stocks of the 15 retail corporations and the notes above mentioned for and in consideration of the issuance to the Rosenthal Co. of 1,500 shares*806 of the stock of Associates and $19,892.29 in cash. On August 2, 1933, the stockholders and directors of the Rosenthal Co. adopted resolutions authorizing the transfer of the stocks and notes for 1,500 shares of the stock of Associates and $19,892.29 in cash, and on August 3, 1933, Associates accepted the offer. On August 3, 1933, the Rosenthal Co. executed and delivered a written instrument stating that it thereby sold, transferred, and assigned the stock of the retail corporations and the notes to Associates for and in consideration of 1,500 shares of the stock of the latter and $19,892.29 in cash.
On August 10, 1933, the directors of the Rosenthal Co., in further pursuance of the plan, adopted a resolution authorizing the payment on August 15, 1933, to its stockholders of a dividend consisting alone of the stock of Associates, to be distributed to the stockholders of Rosenthal Co. in proportion to the amount of stock held by them in the Rosenthal Co.
Associates did not open its books of account until January 1934, and it did not issue any certificates for any shares of its capital stock, either to the Rosenthal Co. or to its stockholders until March 31, 1934. It did not*807 pay the sum of $19,892.29 in cash to the Rosenthal Co., as provided in the agreement of August 3, 1933, but it entered that amount on its books as a liability to the Rosenthal Co. at the time and in the manner hereinafter set forth. The Rosenthal Co. retained *929 possession of the certificates for the shares of stock of the retail corporations until March 31, 1934, when it transmitted them to the retail corporations for the purpose of having new certificates issued in the name of Associates. During the period August 3, 1933, to January 31, 1934, the Rosenthal Co. collected dividends on the stocks of the 15 retail corporations in the aggregate amount of $13,310.48, and it credited the amounts collected to the "Dividends Received" account on its ledger.
In January 1934 a representative of the Arthur Fertig Co. audited the books of the Rosenthal Co. and at the same time opened the books of account for Associates. The stocks of the retail corporations and the promissory notes referred to in the instrument of August 3, 1933, were set up on the books of Associates at an amount equal to the cost of those assets to the Rosenthal Co. The opening entries on the books of Associates*808 were dated August 10, 1933, and were as follows:
| Debits | Credits | |
| Investments - Stocks | $294,106.00 | |
| Notes receivable - collateral | 47,976.61 | |
| Notes receivable - other | 1,849.44 | |
| Capital stock - 1,500 shares | $150,000.00 | |
| Surplus - paid in | 174,039.76 | |
| Accounts payable - | ||
| E. M. Rosenthal Jewelry Co | 19,892.29 | |
| $343,932.05 | $343,932.05 |
In his audit in January 1934 of the books of the Rosenthal Co., the accountant, upon ascertaining that the Rosenthal Co. had collected the $13,310.48 of dividends on the stocks of the retail corporations, made entries on the books of the Rosenthal Co., under date of January 31, 1934, debiting the dividends received account and crediting Associates in that amount; and he made entries on the books of Associates, under date of January 31, 1934, debiting that amount to "Accounts Payable E. M. Rosenthal Jewelry Co." Associates reported the amount of $13,310.48 as dividends received from domestic corporations on its income tax return for the fiscal year ended June 30, 1934.
The Rosenthal Co., either in January 1934 or at some time thereafter, made the following entries on its journal:
| Date | Dr. | Cr. | |
| 1933 | |||
| Aug. 3 | Investments: | ||
| 1,500 shs. Genl. Associates | $324,039.76 | ||
| Genl. Associates | 19,892.29 | ||
| By Investments | $292,300.00 | ||
| Bills Rec. Coll. | 49,782.61 | ||
| Bills Rec. Mdse | 1,849.44 |
*809 *930 At the same time, and under the same date, it also made entries on its ledger debiting the amount of $324,039.76 and crediting the amount of $292,300 to an account entitled "Investments."
On or about March 31, 1934, 10 certificates for shares of stock of Associates were prepared by Goldnamer's secretary. Kaufmann signed them, as president, and Goldnamer signed them as secretary-treasurer of Associates. Certificate No. 1, for 1,500 shares, was issued in the name of the Rosenthal Co. and was antedated August 10, 1933. The back of the certificate contains an assignment of the certificate to the stockholders of the Rosenthal Co., executed by the latter under date of March 1, 1934, and the words "Cancelled March 1, 1934, see Cert. #2, 3, 4, 5, 6, 7, 8, 9" were written across the face of the certificate. Certificates Nos. 2 to 9, inclusive, were issued in the names of the 8 stockholders of the Rosenthal Co. They were antedated March 1, 1934, and were delivered to the stockholders on or about March 31, 1934. The number of each certificate, the person to whom it was issued, and the number of shares covered thereby, were as follows:
| Certificate No. | Issued in name of | Shares |
| 2 | Marcus S. Goldnamer | 1 |
| 3 | Helen S. Goldnamer | 374 |
| 4 | Edmund I. Kaufmann | 1 |
| 5 | Lillian S. Kaufmann | 449 |
| 6 | Edwin M. Rosenthal | 1 |
| 7 | Ester L. Rosenthal | 299 |
| 8 | Saul Kaufmann | 150 |
| 9 | Estate of Albert Levi | 225 |
| Total | 1,500 |
*810 The stockholders of the Rosenthal Co. did not upon the receipt of the above mentioned certificates, or at any other time material here, surrender any of the shares of stock held by then in the Rosenthal Co. and they continued to own all of their shares of stock in the latter company for some time after the taxable year 1934.
The Rosenthal Co., under date of March 31, 1934, made entries on its journal debiting "Surplus" and crediting "Investments" in the amount of $324,039.76, with the notation "Gen'l. Asso. Stock distributed." It also made entries on its ledger, under date of March 1, 1934, debiting that amount to "Surplus" and crediting it to "Investments", with the notation "dividends pd."
Certificates for the shares of stock of the retail corporations owned by the Rosenthal Co. could not be assigned and certificates for the shares of stock of Associates could not be issued without the signature and approval of Goldnamer as an officer of the Rosenthal Co. and Associates. Goldnamer did not, at any time prior to March 1934, specifically direct that such assignments or stock certificates be prepared for his signature, and he did not, at any time prior to Janyary 1934, direct*811 the opening of the books of account for Associates. *931 His private secretary urged him frequently during the latter part of the year 1933 to attend to all of those matters, but he neglected to do so until January and March of the year 1934, as hereinbefore stated.
The charter of Associates authorized it, among other things, to engage in the wholesale and retail jewelry business and to own stock in other corporations, but during the years 1933 and 1934 it did nothing more than hold the stocks and notes acquired from the Rosenthal Co. and collect the dividends and interest thereon. Its books were kept by Goldnamer's private secretary.
The petitioners did not include in their income tax returns, either for the year 1933 or the year 1934, any amount on account of the receipt by them of shares of stock of Associates.
The Commissioner determined that the 1,500 shares of stock of Associates were distributed to the stockholders of the Rosenthal Co. in the year 1934, and that the distribution was taxable to them as a dividend at the amount of $415.83 per share, representing that part of the fair market value of each share on March 31, 1934, which was not in excess of the*812 per share portion of the earnings and profits on March 31, 1934, of the Rosenthal Co. accumulated after February 28, 1913. On the basis of such determination and of his finding that petitioner Jeanette Levi owned a 40 percent beneficial interest in the shares which were distributed to the Levi estate, the Commissioner included the following amounts in the dividend income of the petitioners for the year 1934:
| Edmund I. Kaufmann | $415.83 |
| Lillian S. Kaufmann | 186,707.67 |
| Marcus S. Goldnamer | 415.83 |
| Helen Goldnamer | $155,520.42 |
| Saul Kaufmann | 62,374.50 |
| Jeanette Levi | 37,427.70 |
OPINION.
TYSON: The transaction here under consideration was apparently devised with the intention of bringing it within the scope of section 112 (g) of the Revenue Act of 1932, 2 so that the stockholders of the Rosenthal Co. could receive all of the shares of stock of the new corporation, Associates, without the recognition of any gain to them. The Rosenthal Co. assigned the stocks of the retail jewelry corporations and the notes receivable to Associates, on August 3, 1933, *932 in consideration for the issuance to it of the entire 1,500 shares of Associates and $19,892.29 in cash, *813 and on August 10, 1933, the Rosenthal Co. by corporate resolution authorized the distribution on August 15, 1933, of the 1,500 shares of Associates to its stockholders. However, no entries of the transaction were made on the books of account and no certificates for the stock of Associates were issued or delivered, either to the Rosenthal Co. or to its stockholders, until the year 1934. The Revenue Act of 1934 was approved on May 10, 1934. By that act, Congress, for taxable years beginning after December 31, 1933, abolished the privilege of receiving, tax free, distributions of the kind described in section 112(g), supra.3 The Commissioner, in Regulations 86, prescribed by him under the Revenue Act of 1934, incorporated a provision reading as follows:
ART. 112 (g)-5. Receipt of stock or securities in reorganization without surrender of stock by shareholder. - Any distribution, though in pursuance of a plan of reorganization, to shareholders without the surrender of their stock, in any taxable year beginning after December 31, 1933, by or on behalf of a corporation a party to a reorganization, * * * of stock or securities of another corporation a party to the reorganization, *814 shall be taxed to such shareholders as a dividend, within the meaning of section 115, to the extent that the fair market value of such stock or securities at the date of the distribution is not in excess of the earnings or profits of the corporation accumulated after February 28, 1913. * * *
*815 The Commissioner determined that the petitioners had received the stock of Associates in March 1934 as a dividend distribution by the Rosenthal Co. and that such distribution represented income in the year 1934 taxable under article 112(g)-5, supra. He accordingly increased the dividend income of each petitioner to the extent of $415.83 for each share of stock received by him.
The deficiencies are for the year 1934, and no claim is here made that, if the distributions of stock here involved were made in that year, they would be tax free. The questions for decision are (1) whether the petitioners derived taxable income from the transaction here involved in the year 1934, and (2) if they did, whether the Commissioner erred in determining the fair market value of the stock of Associates and the amount of the earnings of the Rosenthal Co. accumulated after February 28, 1913, for the purpose of computing the amount to be included in the income of the petitioners under article 112(g)-5, supra.
The first question requires consideration of the effect of the resolution declaring the dividend in August 1933, and of the issuance and delivery of the certificates for the shares*816 of stock of Associates in payment of that dividend in March 1934.
*933 The Commissioner contends that the mere declaration of the dividend in stock of Associates did not constitute "either a dividend or a distribution" and that, since the certificates representing such stock were actually issued and delivered in March 1934 and the distribution was not recorded as having been made on the books of the Rosenthal Co. until March 1934, the stock was "paid to" and received by the petitioners in March 1934.
The petitioners contend that the resolution had the effect of vesting ownership of the stock in them on August 15, 1933, the date on which the dividend was made payable, and that the tardy issuance and delivery of the certificates had no bearing upon the time of passage of title to the stock, since stock certificates are nothing more than evidence of ownership and do not represent the stock itself. They further contend that they acquired the actual ownership of the stock in 1933 by virtue of a distribution made and completed in that year in pursuance of a plan of reorganization; that the principles of constructive receipt are inapplicable; and that even if the distribution*817 should be regarded as an ordinary corporate dividend, taxable as income when it became unqualifiedly subject to the demand of the distributees, the stock was set aside for them and they became the owners thereof on August 15, 1933, and, hence, they could then have had the certificates on their demand.
We think it is obvious from our findings that the distributions of the Associates stock here involved were made in pursuance of a plan of reorganization, such reorganization being defined in section 112(i) and the plan being covered by section 112(g) of the Revenue Act of 1932.
Notwithstanding that the distribution of the stock here involved was made in pursuance of such a plan of reorganization as is provided for in section 112(g), supra, yet, nevertheless, it is here taxable as a dividend if it was, in fact, made in 1934, to the extent that the value of the stock represented earnings and profits accumulated after February 28, 1913; and this because section 112(g), which would render such distribution nontaxable, was not in force and effect in 1934. Therefore, the time when the distribution became income for tax purposes must be tested under the rules applicable to income*818 received in the form of corporate dividends.
In those cases where income is accounted for on the accrual basis the rule is that dividend income accrues to the shareholder when a corporate debt on account of the dividend is created and the liability becomes fixed, and if, by the law of the domicile of the declaring corporation, the debt is created when the dividend is declared, the income accrues at that time; but if, by that law, the debt is created at a future date when the dividend is made payable, the income accrues at that future date. ; *934 , and authorities cited. In those cases where, as here, income is accounted for on the cash basis, the rule is, as stated in a regulation which, with unimportant change in phraseology, has been in effect since 1921, that the dividend constitutes income of the stockholder when the cash or other property is unqualifiedly made subject to his demand. 4 This latter rule, which requires complete dominion over the property in question, goes far beyond the mere accrual of the right to such property. *819 Cf. ;.
The uncontradicted evidence here is to the effect that the Rosenthal Co. not only decided and intended in 1933 to distribute to its stockholders all of the stock of Associates, but also that it voted at the meeting of August 10, 1933, to make such distribution on August 15, 1933. The Rosenthal Co. thus became obligated to pay the dividend on August 15, 1933, and the subject matter of the dividend, i.e., the 1,500 shares of Associates stock, was earmarked and segregated from other corporate assets by specific description thereof in the resolution by which the dividend was voted. The stock was thereafter held by the Rosenthal*820 Co. as trustee for its stockholders and it was powerless to rescind its action as to such distribution. . It follows, therefore, that the petitioners, on August 15, 1933, had an absolute and fixed right to receive the stock of Associates. ;
Shares of stock are the interest or right which the owner thereof has in the management, profits, and assets of the corporation, while stock certificates are mere symbols or paper evidences of the ownership of the shares and are not the stock itself. One may be a shareholder in a corporation without ever receiving a certificate of stock therein; and a shareholder may sell his interest in and pass title to the stock prior to delivery of certificates thereof if such was the intention of the parties. ; ; ; *821 ; ; , affirming ; ; ; ; , affirming ; , *935 affirming ; , affirming .
Upon due consideration of all of the evidence presented, it is our opinion that the petitioners not only acquired (1) a fixed right to receive the stock of Associates on August 15, 1933, but also that they acquired at the same time (2) the ownership of and the unqualified dominion and unlimited control over the said stock. Neither the transfer of ownership of stock nor the conferring of dominion and control over stock is established by the mere issuance and delivery of stock*822 certificates. ;The transfer of the stock here involved was effected and completed by the corporate resolution of August 10, 1933, adopted in connection with a plan of reorganization, and before the delivery of the stock certificate. The plan was agreed upon by Goldnamer, Kaufmann, Rosenthal, and the other stockholders of the Rosenthal Co., and a written agreement was made by the Rosenthal Co., duly approved by its stockholders, to transfer a substantial part of its assets to Associates for the entire stock of the latter company. Pursuant to that agreement a bill of sale was executed by the Rosenthal Co. to Associates, and this was followed by a resolution of the Rosenthal Co., also a part of the plan, that the stock of Associates be distributed pro rata to its stockholders as a dividend on August 15, 1933. Although the Rosenthal Co. had not, at that time, received a certificate for the 1,500 shares of Associates and no certificates whatever had then been issued, there is no contention here that the Rosenthal Co. did not become the owner of the stock of Associates on August 15, 1933, and*823 the respondent, on brief, concedes that the Rosenthal Co. was such owner in 1933. There was no express or implied condition, in the resolution or otherwise, which prevented the passage of all of the rights of ownership to the stockholders, including dominion and control.
The corporate intention to effect an immediate and unqualified distribution of the stock of Associates on August 15, 1933, and the understanding of the stockholders that this would be done are clearly established by the plan of reorganization, the terms of the resolution of August 10, 1933, and the testimony of Goldnamer, the accountant, and the attorney, who were active participants in the formulation and execution of the plan of reorganization.
In support of his contention that the distributions of Associates stock here involved were not made on August 15, 1933, by the adoption of the resolution of August 10, 1933, providing for such distributions, respondent cites the cases of and . The former case is distinguished on its facts in the vital particular that in that case the *936 resolution declaring*824 the dividend involved therein is not shown to have specified a definite time for the payment of the dividend, as was done by the resolution in the instant case. The case of , is also distinguished on its facts in that there the holding that dividends declared in November of one year and payable on or before December 31 of that year were actually received by the stockholders in January of the following year, was based upon an invariable practice of the corporation, the deliberate design of which was to prevent the actual receipt by the stockholders of payment of the dividends until January of the following year; a design which was known to, and acquiesced in, by the stockholders. No such facts appear in the instant case.
In addition to the fact that the certificates were not actually issued until March 1934, some of the other evidence tends to reflect distribution of the stock here involved in that month. This evidence consists of entries made on the journal and ledger accounts of the Rosenthal Co., the former dated March 31, 1934, and the latter dated March 1, 1934, charging the amount of the distributions to surplus and crediting*825 it to investments. The Commissioner relies upon these latter entries, in addition to the fact that no stock certificates of Associates were issued until 1934. The writing off of the distribution on the books is, of course, some evidence of the time the stock was placed within the dominion of the stockholders. But the fact that charges against surplus and credits to investments were made on the books in March 1934 purporting to reflect a distribution of the stock at that time does not warrant the conclusion that the stock was made unqualifiedly subject to the demand of the petitioners for the first time, in the year 1934. Book entries have some evidentiary value, but on an issue of whether income is to be taxed in one year or another the books are neither indispensable nor conclusive and the decision must rest on the actual facts. ; ; ; *826 ; ; ; ; and . As we said in the Loftis case, supra, "While book entries may afford some evidence to support a fact, it is well established that they can not of themselves prove a fact otherwise authoritatively denied." The evidence afforded by the book entries in the instant proceedings must yield to the otherwise proven and established fact that ownership and unrestricted command over the stock passed to the petitioners on August 15, 1933, under the resolution of August 10, 1933, authorizing the distribution of the stock on August 15, 1933. We, therefore, reject *937 the Commissioner's contention that the stock of Associates was paid to, and was received by, petitioners in March 1934, and hold that it was acquired and became unqualifiedly subject to their demands on August 15, 1933, and is not taxable to them as income of the year 1934.
In view of our conclusion on the primary question, it is*827 unnecessary to determine the fair market value of the stock of Associates, as of March 31, 1934, or the amount of the earnings and profits, as of that date, which the Rosenthal Co. had accumulated after February 28, 1913.
Decision will be entered under Rule 50.
Footnotes
1. Proceedings of the following petitioners are consolidated herewith: Marcus S. Goldnamer; Jeanette Levi; Helen Goldnamer; Saul Kaufmann; and Lillian S. Kaufmann. ↩
2. SEC. 112. RECOGNITION OF GAIN OR LOSS.
(a) General Rule.—Upon the sale or exchange of property the entire amount of the gain or loss, determined under section 111, shall be recognized, except as hereinafter provided in this section.
* * *
(g) Distribution of Stock on Reorganization↩.—If there is distributed, in pursuance of a plan of reorganization, to a shareholder in a corporation a party to the reorganization, stock or securities in such corporation or in another corporation a party to the reorganization, without the surrender by such shareholder of stock or securities in such a corporation, no gain to the distributee from the receipt of such stock or securities shall be recognized.
3. See section 112 of the Revenue Act of 1934, omitting section 112 (g) of the Revenue Act of 1932; and section 1, Revenue Act of 1934. See also H. Rept. 704, 73d Cong., 2d sess., p. 14; S. Rept. 558, 73d Cong., 2d sess., pp. 16, 32. ↩
4. Art. 115-1. [Regulations 86.] A taxable distribution made by a corporation to its shareholders shall be included in the gross income of the distributees when the cash or other property is unqualifiedly made subject to their demands.
Art. 42-3. [Regulations 86.] Dividends on corporate stock are subject to tax when unqualifiedly made subject to the demand of the shareholder.
See also arts. 641 and 333, Regulations 77, under the Revenue Act of 1932. ↩