*4055 INCOME. - Petitioner, the proprietor of an automobile business and the owner of certain real and personal property not connected with said business, decided to form a corporation and transfer to it his automobile business and other property as of July 1, 1919. He had the books of the business closed as of June 30, 1919; carried forward the balances and set up on the books the value of the other property as of July 1, 1919, for the continuation of the business and use of the other property for the benefit of the proposed corporation. The corporation was incorporated on August 18, 1919, and on August 22, 1919, petitioner entered into a written contract to sell the said business and other property to the corporation for its capital stock. Held, that the income derived from said business and other property during the period from July 1, to August 22, 1919, was the income of this petitioner under authority of the Board's decision in Peter W. Rouss,4 B.T.A. 516">4 B.T.A. 516. Held, further, in the absence of evidence as to the amount of said income, that the net income for the 6-month period from July 1, to December 31, 1919, as shown by the corporation's books may be allocated*4056 to petitioner on the basis of the proportion of 52/184.
*712 Respondent has determined a deficiency in petitioner's income tax in the amount of $63,838.08 for the calendar year 1919, of which amount $41,875.62 is in controversy in this proceeding.
The petition sets forth the following allegations of error:
(1) That respondent erroneously included in petitioner's net income for 1919 the amount of $61,581.79 to which amount petitioner alleges he had no legal right nor title and which he did not reduce to his possession.
(2) That respondent erred in computing the said $61,581.79 by allocating to petitioner 52/184 of the net income as shown by the corporation's books for the period July 1, to August 22, 1919, that allocation being on the basis that the number of days from July 1, to August 22, 1919, bore to the number of days from July 1, to December 31, 1919.
*713 (3) That respondent erred in determining that, since C. C. Coddington, Inc., did not have a de jure existence until August 18, 1919, and*4057 the written agreement for the transfer of petitioner's automobile business and other property to the corporation was dated August 22, 1919, the income from those assets from July 1, to August 22, 1919, is taxable to petitioner.
(4) That respondent erred in disregarding an alleged oral agreement entered into prior to July 1, 1919, between petitioner and the incorporators of C. C. Coddington, Inc., whereby the said assets were transferred to said incorporators as of July 1, 1919, as trustees for the proposed corporation.
(5) That if C. C. Coddington, Inc., had no legal right nor title to the income in question then (in the alternative) respondent erred in not holding said incorporators to constitute an association and taxable as such for the income in question.
FINDINGS OF FACT.
Petitioner is a resident of Charlotte, N.C.
During the first part of the year 1919 and for about 10 years prior thereto, petitioner as an individual, conducted an automobile distributing agency in Charlotte, for the sale and distribution of Buick cars in the States of North Carolina and South Carolina. In order to prevent the business from disintegrating in the event of his death and to preserve*4058 his Buick sales agency contract for the benefit of his family, petitioner decided to incorporate that business. He also decided to transfer to the proposed corporation certain other real and personal property owned by him, but which had no connection with his automobile business. Accordingly, in or about April or May, 1919, petitioner advised his attorney, T. C. Guthrie, that he intended to incorporate his business and requested the attorney to attend to the necessary legal steps. Petitioner informed his wife, Marjorie L. Coddington, and his business associate, Lee A. Folger, that he intended to incorporate the business on July 1, 1919, or as soon thereafter as he could have the books audited and requested them to be his coincorporators.
Petitioner also secured the services of D. H. McCollough, a certified public accountant, to audit the books of the business. Petitioner outlined to McCollough his plans for incorporating and directed him to audit and close the accounts of the auto business as of June 30, 1919; to set up a net worth of $200,000 the amount invested; to ascertain the profits to be paid to Folger and petitioner, and to carry forward the balances for a continuation*4059 of the business by the proposed corporation. About the middle of August, 1919, McCollough completed his audit as of June 30, 1919, which showed the profit *714 to be $151,582.11 which was treated as a liability payable to Folger and petitioner, and showed the net worth of the business to be $200,000. The balances were carried forward and set up on the same set of books as of July 1, 1919, for the continuation of the business by the proposed corporation.
On August 18, 1919, a certificate of incorporation of C. C. Coddington, Inc., was filed with the Secretary of the State of North Carolina, by Marjorie L. Coddington, Charles C. Coddington and Lee A. Folger, each of whom subscribed to one share of stock merely for corporate purposes. On August 22, 1919, C. C. Coddington, Inc., hereinafter referred to as the corporation, was formally organized with an authorized capital stock of $1,000,000, divided into 10,000 shares of a par value of $100 each, by-laws were adopted and the incorporators were elected as directors.
On August 22, 1919, petitioner for a consideration of $770,000 par value of the corporation's capital stock entered into a written agreement -
That the said*4060 C. C. Coddington, being the proprietor of the automobile and automobile accessory and supply sales business heretofore and at present conducted by him in the City of Charlotte, does hereby propose and agree to sell to C. C. Coddington, Inc., its successors and assigns the following property at the prices herein below stated:
| Net worth of Buick sales agency | $200,000 |
| Stock and securities | 270,775 |
| Real estate | 145,225 |
| Also the established business of C. C. Coddington for the sale of automobiles, accessories and supplies, including the organization, personnel, good will, and all business connections and assignable contracts, valued at | 154,000 |
| Total | $770,000 |
and the corporation agreed to purchase the said property and to issue Coddington 7,700 shares of its capital stock in payment therefor upon Coddington's execution and delivery of sufficient deeds, assignments and transfers. On August 22, 1919, the directors of the corporation adopted a resolution authorizing the acceptance of the offer made by Coddington, the execution of the said contract and also the issuance of 7,700 shares of its stock as provided in said contract. The contract specifically described the*4061 stock, securities and real estate, but that personal and real property were in no wise connected with the automobile business.
The books of account of the automobile business were not closed nor balanced on August 22, 1919, but were continued in use with the June 30, 1919, balances carried forward to July 1, 1919, but neither the name of petitioner nor of the corporation appeared thereon. There were set up on the books as of July 1, 1919, the net worth of the *715 automobile business, $200,000; the value of the other property, $570,000; and a capital stock account of $770,300. The corporation's accounts were balanced on December 31, 1919, and on June 30, 1920.
The corporation's fiscal year ended on June 30, 1920, and in its income-tax return for the period July 1, 1919, to June 30, 1920, it reported all income derived from all its assets during that period including the income, if any, from the Buick agency business and the other property from July 1, to August 22, 1919, which the corporation received.
The Commissioner, in auditing the return of the corporation and of the petitioner, allocated as income to petitioner for his calendar year 1919 an amount of $61,581.79*4062 of the net income reported by the corporation for its fiscal year ended June 30, 1920, on the ground that petitioner legally owned the automobile business and the other real and personal property until August 22, 1919, and that the income from those assets from July 1, to August 22, 1919, was the income of petitioner. Inasmuch as the books of the automobile business were not balanced on August 22, 1919, and the amount of income derived from July 1, to August 22, was not shown, the Commissioner allocated as income to petitioner 52/184 and to the corporation 132/184 of the net profits as shown by the corporation's books for the period July 1, to December 31, 1919. The petitioner's claim as presented at the hearing on this proceeding is that the income from the automobile business from July 1, to August 22, 1919, was not his income and therefore not taxable to him individually, but on the other hand that prior to July 1, 1919, there was created either a trust for the benefit of the proposed corporation or else an association composed of the incorporators.
OPINION.
TRUSSELL: The record of this action establishes that some time prior to June 30, 1919, the petitioner arranged with*4063 his wife and a business associate to join with him in the organization of a corporation for the purpose of taking over and operating petitioner's automobile sales agency, and managing and caring for other real and personal property, then owned by the petitioner, and that it was his purpose to have such corporation organized and begin business on July 1, 1919. Petitioner then took steps to bring about results which he had in mind. The incorporation of the company was not completed, however, until August 18, 1919. We have been unable to find in this record anything which we can construe into either the declaration of a trust in favor of the petitioner and his associates or the effect of producing an association between them covering the *716 period from July 1 to August 18 or 22 in respect to the ownership of the gains and profits produced by the business and property ultimately turned over to the corporation on August 22, 1918.
The other issues here involved are substantially identical with the case of , and the opinion and decision of the Board in that case is equally controlling in the present case. Compare also *4064 .
Judgment will be entered for the respondent.