*588 Before JAMES, STERNHAGEN, and TRUSSELL.
This appeal involves the determination of alleged deficiencies in income and profits taxes asserted by the Commissioner against the taxpayer as follows:
| For the fiscal period ended May 31, 1919 | $565.16 |
| For the fiscal period ended May 31, 1920 | 2,991.13 |
These deficiencies are based upon, or grow out of, additions to the taxable income made by the Commissioner in the sum of $1,146 for the fiscal period ended in 1919, and $9,288 for the fiscal period ended in 1920. The taxpayer has consented to the addition to taxable income for the fiscal period ended in 1919 of the sum of $1,146, the full amount asserted by the Commissioner, and for the fiscal period ended in 1920 of the sum of $1,288. The Commissioner has conceded that of the total which he asserted as an addition to taxable income for the fiscal period ended in 1920 two items, one of $500 and another of $166.25, were erroneously added to income by him for that period. It thus follows that the only issue*2869 of fact for the consideration of the Board is what amount, if any, should be added to the taxable income for the fiscal period ended in 1920 on account of the receipt by the taxpayer in that period of 75 shares, par value $100 per share, of stock of the Famous Players-Lasky Corporation in settlement of a judgment obtained in favor of the taxpayer in the year 1910.
At the hearing there were introduced in evidence a copy of an account appearing on the taxpayer's books against one Gustave Frohman as of April 8, 1902, and three promissory notes, dated May 21, June 23, and July 24, 1896, respectively, given by said Frohman to the taxpayer. Thomas A. O'Brien, secretary and treasurer of the taxpayer corporation, was sworn and testified in behalf of the taxpayer.
Following the hearing counsel for the taxpayer and the Commissioner filed a stipulation agreeing that on October 10, 1919, the stock shares of the Famous Players-Lasky Corporation had a market value of $110 per share, and from the record the Board makes the following
FINDINGS OF FACT.
The taxpayer is a corporation organized under the laws of the State of New York, having its office and place of business in the city of*2870 New York. It has existed as a corporation and has been engaged in the business of printing and lithographing since 1896 and for some time prior thereto.
*589 Prior to May 21, 1896, the taxpayer had produced and furnished upon the order of Gustave Frohman various items of merchandise, for which the said Frohman became indebted to the taxpayer, and said Froham gave to the taxpayer his promissory notes as evidence of the amount owing by him, as follows:
| One note dated May 21, 1896, due August 21, 1896, for | $850.00 |
| One note dated June 23, 1896, due September 23, 1896, for | 1,000.00 |
| One note dated July 24, 1896, due October 24, 1896, for | 1,144.40 |
| Total amount of indebtedness | 2,994.40 |
These notes were not paid at maturity.
During the month of February, 1897, said notes not having been paid, taxpayer caused them to be charged off its books as uncollectible. Later, however, and on or about May 5, 1910, the taxpayer recovered against Frohman a judgment as a result of a suit upon said notes for the total sum of $5,548.88, and the total amount of such judgment was made up as follows:
| Original principal of indebtedness | $2,994.40 |
| Interest to date of judgment | 2,438.64 |
| Cost of procuring judgment | 115.84 |
| Total | 5,548.88 |
*2871 On March 1, 1913, the judgment debtor had no property against which the judgment might have been enforced and the taxpayer's claim was practically without value. On or about October 10, 1919, the judgment debtor, having in the meantime acquired some property, the taxpayer's claim was settled by the assignment and delivery to the taxpayer by the judgment debtor of 75 shares of the capital stock of the Famous Players-Lasky Corporation of a par value of $100 per share, and having on that date, October 10, 1919, a market value of $110 per share.
DECISION.
The amount of taxable income received by the taxpayer in settlement of its claim against the judgment debtor is the difference between the market value of the shares of stock received, namely, $8,250, and the amount paid by the taxpayer in 1910 as the cost of procuring the judgment, namely, $115.84.
The deficiency in tax should be recomputed in accordance with the foregoing. Final decision will be settled either on consent or on 10 days' notice in accordance with Rule 50.