*2530 1. Title to property passes when the parties so intend. Legal rules as to when title passes on f.o.b. shipments are merely aids for ascertaining intention and must yield when the intention of the parties conflicts with the presumption created by the rule.
2. Circumstances surrounding contracts held sufficient to show intent of parties that title should pass to buyer, as to one contract, insufficient to show such intent as to other contract.
3. Petitioner may include in its inventory only such property to which it had title in the year in question.
4. No abnormality requiring computation of profits taxes under the special assessment provisions exists merely because title to goods contracted for did not pass within the year to permit reduction of income by including such goods, the market price of which had declined, in inventory.
*720 This is a proceeding for the redetermination of income and profits taxes for the year 1920 in the amount of $7,774.94, of which $7,342.36 is in issue. Under the pleadings*2531 as amended, and the stipulations of the parties, the principal issue for determination is whether petitioner is entitled to include in its closing inventory as of December 31, 1920, certain lumber covered by two written contracts of purchase at the fair market value on December 31, 1920.
The petitioner also, by amendment, raises the question of special assessment as an alternative in the event that the principal issue is decided adversely to it in the theory that an abnormal condition is thus presented.
FINDINGS OF FACT.
The Brown Lumber Co. has, since its organization in December, 1909, been engaged in the business of buying, selling and producing lumber and lumber products. On March 15, 1920, petitioner entered into a written agreement with A. M. Chesbrough as follows:
March 15th, 1920
MEMORANDUM OF AGREEMENT entered into this fifteenth day of March, 1920, by and between A. M. Chesbrough of Thompson, Michigan, first party, and THE BROWN LUMBER COMPANY of Manistique, Michigan, second party, whereby A. M. CHESBROUGH sells and THE BROWN LUMBER COMPANY buys a certain lot of lumber now in pile at Thompson, Michigan, and estimated at:
100,000 ft. of 4/4 #3 Maple
100,000*2532 ft. of 8/4 #3 Maple
70,000 ft. of 4/4 & 5/4 #3 Beech
40,000 ft. of 4/4 #3 Birch
120,000 ft. of 4/4 #1, 2, 3 Common Maple Flooring Boards, at the following prices F.O.B. cars Delta Junction, viz.,
$35.00 per M ft. for #3 Com. Maple, Beech & Birch
65.00 per M ft. for #2 Com. Maple flooring boards,
and 100.00 per M ft. for #1 Com. Maple flooring boards with terms of payment sixty days net from date of invoice, and all lumber to be shipped out by June 15th, 1920.
First party also agrees to sell second party all the #3 Common Beech and Maple sawed during the season of 1920 up to September first, at $35.00 per M ft., excepting and reserving 400,000 ft. of Maple and Beech. First party also agrees to sell all the 4/4 #1 and 2 Common Maple flooring boards that may be sawed up to September first, at $65.00 per M ft. for #2 Common and $100.00 per M ft. for #1 Common, all delivered F.O.B. cars Delta Junction.
Terms of payment on the new cut to be net sixty days from shipment and shipments to be made during the months of July, August, September and October.
Second party agrees to arrange for car service to Delta Junction and in event of their not being able to do so or in*2533 event of their not being able to receive the lumber at their yards at Manistique or elsewhere, first party retains the right to market his lumber and cancel this agreement.
*721 The inspector for the lumber shall be agreed upon and cost of inspecting shared equally.
Accepted as above.
(Signed) A. M. Chesbrough
BROWN LUMBER COMPANY
By (Signed) W. W. Parr
Shipments were made from time to time in 1920 by A. M. Chesbrough under the above contract. However, all of the lumber had not been shipped as of December 31, 1920, there remaining in pile in the yard of the seller at Thompson, Mich., the following lumber covered by the purchase agreement:
180 M feet 4/4 #3 hardwood
4 M feet 5/4 #3 beech
75 M feet 8/4 #3 beech and maple
120 M feet 4/4 #2 common and better maple
W. W. Parr was, during the year 1920 and for years prior and subsequent thereto, president and general manager of the petitioner.
On or before December 31, 1920, Parr made an inspection of the unshipped lumber in the yards of A. M. Chesbrough at Thompson, Mich., covered by the above contract. During such inspection Parr was unable to definitely determine whether the lumber in pile as at the*2534 close of the year 1920 contained the lumber that was in pile on March 15, 1920. However, the 8/4 #3 maple which was in pile as at the close of the year 1920, as well as the 5/4 #3 beech in pile at the close of the year 1920, were definitely determined as being the same lumber that was in pile on March 15, 1920, in that no additional cut of these thicknesses was made subsequent to March 15, 1920, under the above order.
Under date of December 23, 1920, A. M. Chesbrough addressed a communication to the petitioner as follows:
Toledo, Ohio
December 23rd, 1920.
Mr. W. W. Parr,
% Brown Lumber Co.
Traverse City, Mich.
Dear Mr. Parr:
I am going to be at Thompson from Tuesday until Friday of next week, and will be glad to hear from you if you will be there. Thought it might be a good time to adjust a settlement for the lumber in pile, so I can make the proper entries after the first of the year.
Kindly advise me when you think you can be at Manistique.
Yours truly,
(Signed) A. M. Chesbrough.
It was a common practice with respect to such contracts to pile the lumber purchased, marking it with crayon or paint or in some manner to designate that the lumber was sold. *2535 It is possible to ascertain more or less correctly the footage of lumber in the lumber pile by means of tiering. Such estimates are usually fairly correct. The *722 marks upon the pile of lumber set aside under purchase contracts included the estimates of the number of feet in the pile, the date that the lumber is put in the pile and the kind and grade of lumber. It was usual to provide for inspection when the lumber is finally taken out. When the contract above mentioned was entered into with A. M. Chesbrough the lumber that was already in pile was marked as to trade and time of putting in, and after the purchase, was marked with the initials of the Brown Lumber Co., the purchaser. W. W. Parr visited the yard sometime prior to December 31, 1920, and saw that all lumber under the contract was piled and marked as sold to the Brown Lumber Co.
The contract with A. M. Chesbrough provided that shipments were to be f.o.b. Delta, which was three or four miles from the yards of the seller. A logging railroad ran from Thompson, where the yard was located, and cars were switched in from Thompson loaded. The Chesbrough yard engine switched them out to the junction at Delta. *2536 There was no difference recognized in the trade between putting the lumber on board at Delta and at Thompson.
On or about December 29, 1920, A. M. Chesbrough rendered an invoice to the petitioner in the amount of $19,025 to cover the lumber in pile at the Thompson yards as at that date, as aforementioned, which invoice was entered upon the books of the petitioner as a liability as at December 31, 1920.
In submitting the invoice of December 29, 1920, A. M. Chesbrough addressed a communication to the petitioner as follows:
December 29, 1920.
Mr. W. W. Parr,
Brown Lumber Co.,
Manistique, Mich.
Dear Mr. Parr:
I enclose you herewith memo of lumber in dock. I wish you would send me paper covering 20,000 of this amount. This estimate will overrun.
Sorry I missed you here but I will be at Toledo Monday and will be pleased to hear from you.
Very truly yours,
(Signed) A. M. Chesbrough
If you can, send me some money. Will invoice this regular way after receiving word of your acceptance.
Under date of December 30, 1920, the petitioner addressed a communication to A. M. Chesbrough in reply to Chesbrough's letter of December 23, as follows:
A. M. Chesbrough
*2537 Box #533 Central Sta.
Toledo, ohio.
Dear Sir:
Your letter of December 23rd came to hand during my absence. I was at Manistique all of last week and arrived home night before last.
*723 Enclosed you will find settlement on estimate for the lumber that we have on your yard at Thompson, together with settlement for the two cars that have been held up on account of the dispute in the inspection. It is understood that these two cars will be adjusted when the balance of the stuff is shipped out and will be adjusted on the basis of the whole shipment, as to the percentage of each grade.
We want you to render us a Memo invoice to correspond with the Memo we are enclosing. Either leave the date blank or date it not later than December 31, 1920, as we are putting this through our books at this time and taking the loss on our inventory.
Trusting you will find this entirely satisfactory and wishing you the Compliments of the Season, we are
Very truly yours,
BROWN LUMBER CO
By (Signed) W. W. Parr
WWP/DB
Under date of January 5, 1921, A. M. Chesbrough addressed a communication to the petitioner reading as follows:
Toledo, Ohio
January 5th, 1921
Mr. W. *2538 W. Parr,
Brown Lumber Company,
Traverse City, Mich.
Dear Mr. Parr:
I recently sent you memorandum of your lumber at Thompson and for which you said you would make on settlement. I desire that you make it as I am in need of funds. Send me $20,000.00. Make part of it in cash and part acceptance.
The estimate will over run the several amounts and besides this you owe for five cars of maple flooring boards withheld from settlement last fall.
An early reply will oblige me.
Yours truly,
(Signed) A. M. Chesbrough
A.M.C. - L
On January 11, 1921, the following notes were given to A. M. Chesbrough in settlement of the invoice of December 29, 1920, in the amount of $19,025, in addition to invoices dated August 12, 1920, and August 18, 1920, in the amounts of $1,405.16 and $1,062.46, respectively, totaling $21,492.62:
| 1 note, due April 11, 1921, for | $2,500.00 |
| 1 note, due April 16, 1921, for | 2,500.00 |
| 1 note, due April 21, 1921, for | 2,500.00 |
| 1 note, due April 26, 1921, for | 2,500.00 |
| 1 note, due May 1, 1921, for | 2,500.00 |
| 1 note, due May 6, 1921, for | 2,500.00 |
| 1 note, due May 11, 1921, for | 4,025.00 |
| 1 note, due May 11, 1921, for | 2,467.62 |
| Total | 21,492.62 |
*2539 As at December 31, 1920, the fair market value of the lumber in pile at the yards of A. M. Chesbrough covered by the invoice of *724 December 29, 1920, was $9,043. The petitioner included in its inventory of December 31, 1920, the lumber covered by this invoice at the value of $9,043.
Inventories have been valued by the petitioner and its taxable income computed on the basis of cost or market, whichever is lower. The difference between the cost to the petitioner of the lumber in pile at the yards of A. M. Chesbrough of $19,025 and the fair market value thereof of $9,043, or $9,982, was claimed by the petitioner in its income-tax return for the year 1920 as a deductible loss, and the deficiency here in question arises in part as a result of this disallowance.
The lumber in pile at the yards of A. M. Chesbrough on December 31, 1920, was shipped to the petitioner and received and accepted by it from time to time during the early part of 1921. Shipments were completed by May, 1921, and in August, 1921, the petitioner made an additional payment to A. M. Chesbrough of $2,249.06 to adjust for the difference between the actual footage of the lumber in pile on December 31, 1920, as*2540 shown by the subsequent shipments, and the estimate of lumber in pile covered by the invoice of December 29, 1920.
On February 10, 1920, petitioner entered into a contract with the White Marble Lime Co. for the purchase of four million feet of box lumber, which contract was confirmed under the same date in writing as follows:
February 10, 1920.
White Marble Lime Co.,
Manistique, Mich.
Attention - Mr. W. B. Thomas
My dear Mr. Thomas:
Confirming the writer's conversation with you, you may enter our order for four million feet of box lumber sawed from 8' bolts and edged on one edge, price $35.00 per M' on board cars Manistique, Mich. Each party to pay 1/2 inspection fees; terms - 2% off 15 days for cash or sixty days net from date of invoice.
If sixty days is taken, invoice is to be settled promptly by Trade Acceptance. Orders to be given for shipment when shipping dry or settle for on estimate and piles marked up. You are to saw the lumber into 4 5 6 or 8/4 as we may direct. It is understood that this lumber is to be sawed this season by you, unless you are prevented doing so by accidents, strikes, fires or other conditions beyond your control.
We are writing*2541 this in duplicate and the signing of the same constitutes a contract.
Very truly yours,
BROWN LUMBER COMPANY
By (Signed) W. W. Parr
WHITE MARBLE LIME COMPANY
By (Signed) W. B. Thomas, Mgr.
On September 16, 1920, the White Marble Lime Co. wrote the following communication to the Brown Lumber Co.:
*725 Manistique, Mich., Sept. 16, 1920.
Brown Lumber Co.,
Traverse City, Mich.
Attention W. W. Parr.
Gentlemen:
In reply to your telegram of date have wired you that approximate amount of 1920 cut in pile 390 M feet 4/4, 375 M feet 5/4, that loading lumber Traverse City today.
Referring to the contract of date February 10th. We will not be enabled to furnish four million feet due to the strike conditions whereby we were not enabled to start our mill until late in July, whereas at the time of making the contract, I expected to start in April.
As one edger would not take care of the cut, I placed an order the same day that made contract, but due to the general existing conditions, I was unable to obtain shipment until the 7th of this month. The edger has not yet reached us, expect it daily and have everything in readiness to place immediately on its*2542 receipt.
Not having the second edger, all of the lumber does not contain one square edge, this is a matter that you and I will have to adjust and I doubt not that we can do it to our satisfaction. I have not cut any 6/4 or 8/4 as cutting on these two thicknesses they would be more unedged than if cutting on 4/4 and 5/4. Immediately that the edger is received, I will start cutting these two thicknesses.
Another matter for us to adjust is the matter of interest that you think you are entitled to owing to the overestimate of my man as to the amount of lumber. Believe you and I can adjust this to our mutual satisfaction.
Owing to the labor conditions and strike which are beyond our control, I would estimate that our 1920 cut will be in the neighborhood of 2 1/2 million feet. You understand this is simply an estimate as I do not know what the conditions from now to January first will be.
Two cars were placed for loading this morning and the agent said he would give us two more as soon as these loaded. McLellan was sick this morning and unable to work and I secured an inspector from Mr. Gillette in order not to delay the loading.
Yours very truly
(Signed) W. B. Thomas,
*2543 Manager.
Parr, president and general manager of the petitioner, made inspection of the lumber covered by the White Marble Lime Co. contract from time to time. He made an inspection on or immediately before December 31, 1920. In this inspection he found that the lumber purchased under the contract with the White Marble Lime Co. had been placed in pile and was marked in accordance with the trade custom as being sold to the Brown Lumber Co.
Under date of December 30, 1920, the petitioner addressed a communication to the White Marble Lime Co. as follows:
We would like to have you mail us a blanket invoice for the box lumber that we have on order from you.
*726 Enclosed you will find a Memo of the charge that we have put through our books. Understand we are taking a loss of $10.00 per M on this stuff on our inventory and we wish to have an invoice as a matter of record.
When the stock comes out it can be invoiced and checked against this Memo invoice and when the stock is all cleaned up final settlement can be made.
This blanket invoice should be dated not later than December 31st, 1920.
Very truly yours,
BROWN LUMBER COMPANY
By (Signed) W. W. Parr
*2544 Under date of January 5, 1921, the White Marble Lime Co. replied to the letter of the petitioner of December 30, 1920, as follows:
As per your request, we are enclosing invoice for lumber.
When shipments are made, invoices will be rendered and checked against this blanket invoice.
Yours very truly
(Signed) W. B. Thomas
Manager
The invoice referred to in the communication of January 5, 1921, from the White Marble Lime Co. and enclosed with the communication was as follows:
Invoice from
WHITE MARBLE LIME COMPANY
Manistique, Michigan
December 23, 1920
Our
Order No.
Your
Order No.
TO Brown Lumber Co.
Terms: -
Traverse City, Mich.
| 607,893' 4/4 Box and Crating Lumber at $35.00 | $21,276.26 |
| 415,872' 5/4 Box and Crating Lumber at $35.00 | 14,555.52 |
| 691,329' 6/4 Box and Crating Lumber at 35.00 | 24,196.52 |
| 302,100' 8/4 Box and Crating Lumber at 35.00 | 10,573.50 |
| 2,017,194' | $70,601.80 |
This invoice was entered upon the books of the petitioner as a liability as of December 31, 1920. The petitioner included the lumber in the yard of the White Marble Lime Co. in its own inventory of December 31, 1920, at $50,429.85, which was the fair market*2545 value of the lumber on that date.
Under date of February 26, 1921, the White Marble Lime Co. addressed a communication to the petitioner as follows:
Attached you will find estimate of lumber in pile cut in the months of July, August and September.
I have with-held asking for settlement on any of this lumber appreciating your condition. But it has now come to a point where I must have funds to take care of camp labor orders, and I will be obliged if you will send us trade acceptances to the amount of $15,000.00 to be made in amounts of $2,500.00 each. Lumber to cover to be marked up with your name.
I would be obliged if these would reach me by return mail.
*727 The difference between the cost of the lumber in pile in the yard of the White Marble Lime Co. as of December 31, 1920, of $70,601.80, and the market value thereof, which was $50,429.85, was claimed by the petitioner in its income-tax return for the year 1920 as a deductible loss. The Commissioner disallowed this loss in its entirety and the deficiency here in question arises in part as a result of such disallowance.
The lumber in pile at the yard of the White Marble Lime Co. on December 31, 1920, was*2546 shipped to the petitioner and received and accepted by it from time to time during 1921 and 1922. These shipments substantiated the estimate of the lumber in pile on December 31, 1920, set forth in the invoice of December 23, 1920. In August, 1921, the petitioner prevailed upon the White Marble Lime Co. to adjust the contract price to $16.25 per thousand feet of lumber. All the shipments from lumber in pile on December 31, 1920, were settled on that basis.
In 1917 the petitioner expended $8,197.08 for machinery and equipment, charging the cost of same to expense. In its 1917 income-tax return it restored $6,877.50 to income and computed and paid its tax liability accordingly. The restoration was not placed on the books of the taxpayer, nor did it claim or was it allowed depreciation thereon for 1917 or subsequent years. The annual depreciation rate properly allocable to this machinery and equipment is 10 per cent. It is stipulated that for the purpose of this appeal the petitioner may add to its invested capital as of January 1, 1920, the amount of $6,877.50 and be allowed an additional deduction for depreciation for said year of $687.75.
The petitioner has never filed*2547 a claim with the Commissioner of Internal Revenue that its tax for the year 1920 be computed under sections 327 and 328 of the Revenue Act of 1918.
A subpoena duces tecum was served upon the Commissioner of Internal Revenue on August 4, 1927, requesting comparative data with respect to five specified corporations. At the hearing the representative of the Commissioner declined to furnish such data.
OPINION.
SIEFKIN: Four errors were assigned by petitioner - that respondent erred (a) in refusing to allow losses claimed by petitioner on account of two purchases of lumber made in 1920, which, at the close of the year 1920, had a fair market value less than cost, (b) in not computing the tax under the special assessment provisions, (c) in not including certain 1917 expenditures, less depreciation to January 1, 1920, for machinery in invested capital for 1920, and (d) in failing *728 to allow depreciation on such machinery. Under stipulation of the parties the adjustments on the last two items are agreed to and there remain for our consideration only the first two items.
On the first issue only one question remains to be determined - whether title to the lumber covered*2548 by the contracts had passed to petitioner on December 31, 1920. The other factors involved, as the cost of the lumber and its fair market value on December 31, 1920, were stipulated.
The contracts were entered into in the State of Michigan and must be construed under the laws of that State. The Uniform Sales Act is in force in Michigan. Sections 11849 and 11850, Comp. Laws Mich., 1915, so far as pertinent, are as follows:
11849. Sec. 18. Property in specific goods passes when parties so intend.
(1) Where there is a contract to sell specific or ascertained goods, the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred.
(2) For the purpose of ascertaining the intention of the parties, regard shall be had to the terms of the contract, the conduct of the parties, usages of trade and the circumstances of the case.
11850. Sec. 19. Rules for ascertaining intention. Unless a different intention appears, the following are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer:
Rule 1. Where there is an unconditional contract to sell*2549 specific goods, in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment, or the time of delivery, or both, be postponed.
Rule 4(1). Where there is a contract to sell unascertained or future goods by description, and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer, or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be expressed or implied, and may be given either before or after the appropriation is made.
Rule 5. If the contract to sell requires the seller to deliver the goods to the buyer, or at a particular place, or to pay the freight or cost of transportation to the buyer, or to a particular place, the property does not pass until the goods have been delivered to the buyer or reached the place agreed upon.
The respondent urges that both of the contracts in question, being f.o.b. contracts, fall within the purview of Rule 5 above quoted. Williston on Sales, vol. 1, p. 602, in regard to the question as to when*2550 property passes under f.o.b. contracts, says:
As it is a necessary implication in F.O.B. contracts that the buyer is to be at all expense in regard to the goods after the time when they are delivered free on board, the presumption follows that the property passes to the buyer at that time, and not before, though the goods are brought to the point of shipment and are ready for loading.
This statement is supported by decisions of the Supreme Court of Michigan both before and after the enactment of the provisions of the Uniform Sales Act. In , *729 where the contract was to furnish all coal needed by the second party until a specified time at certain prices, f.o.b. Michigan Central R.R., and where it was argued that f.o.b. was only a factor in the selling price, the court said:
* * * "Free on board" has acquired a settled judicial meaning. .
In the Vogt case cited, the contract was as follows:
Received of Paul Vogt of Milwaukee, Wis., Five ( $5) dollars on account of sale to him by me, made this 15th day of November, *2551 1902, of 100,000 feet more or less of pine one inch lumber at Eight Dollars per 1,000 feet common or better now at Stadler's Mill, f.o.b. to be delivered upon demand within two months from above date. Inspection fees to be paid by both of us.
In discussing the authorities applicable to this contract, the court said they generally hold -
That a sale F.O.B. cars means that the subject of the sale is to be placed on the cars for shipment without any expense or act on the part of the buyer and that as soon as so placed, the title it to pass absolutely to the buyer * * *.
In a later case, ; , the Michigan Supreme Court restates the rule thus approved by it in Detroit Southern R.R. Co. v. Malcolmson, as follows:
The general rule is that title passes when the vendor has fully performed in the appropriation and delivery of the goods to the vendee, and delivery to a public carrier for transportation constitutes delivery to the vendee. There may, of course, be stipulations in the contract or circumstances attending its performance which indicate a contrary intention. *2552 (wherein a bill of sale was given at the time of contracting). This rule is, in effect, incorporated in the sections of the Uniform Sales Act * * *.
Decisions such as the foregoing do not purport to state a fixed rule of law, but merely discuss a presumption designed to aid in ascertaining by inference the intent of the parties as to when title should pass.
It remains for us to examine the terms of the contract, the conduct of the parties, usages of trade and the circumstances attending the several contracts to determine whether, as urged by petitioner, the intentions of the parties thereto were shown to be that title should pass at some time other than when the subject matter was loaded on the cars. For this purpose the contracts in question will be separately considered.
With respect to the Chesbrough contract the petitioner, apparently, would have us distinguish between the lumber in pile at the time the contract was entered into and that to be later cut. As to that part in pile petitioner calls attention to the use of the words "buys" and "sells" which it is contended indicate a sale rather than an*2553 agreement *730 to sell. In support of its position, petitioner cites , wherein the contract was to "sell you the cedar ties we now have on the Boyce property * * * at 42 cents on the ground as they are." However, the words used there leave little doubt that the sale was made outright without any further act required to the seller, the only thing remaining to be done was to check the estimate given in the contract by an actual count of the ties. The ties in that case and the lumber in pile in the instant case may be said to have been in a deliverable state. However, no delivery other than the seller's allowing the buyer to take the goods was contemplated in the cited case, while in the case at bar, the delivery required of the seller to complete the terms of the contract was the actual loading on the cars. See Williston on Sales vol. 1, p. 591. This distinction will be again referred to below in connection with the consideration of the contract as a whole.
Petitioner's contention that the contract should be divided and that the title to the lumber in pile passed when the contract was entered into in accordance*2554 with the intention expressed by the words "buys" and "sells" must be rejected. Had the letters f.o.b. not been used respecting this feature of the contract there might be force to the contention. See ; , in which delivery required of the seller outweighed the word "sells." See also Williston on Sales, vol. 1, p. 527, where it is pointed out that little reliance can be placed on such terms, as they are constantly used to mean "contract to sell or contract to buy." Reference may likewise be made to the contract in the Vogt case, supra, where the word "sale" is disregarded. Furthermore, it would be idle for us to consider the several parts of the contract separately, as only the total value of the lumber in pile at Thompson at the close of the year is in evidence, no attempt having been made to value the portions of such lumber covered by the respective contract divisions contended for. Accordingly, if we can not find it the intention of the parties to pass title to all such lumber, we are in no position to disturb the respondent's determination.
With respect to the lumber covered by the whole contract, *2555 several of the facts relied upon by petitioner may be briefly dismissed. Among these are the facts that by December 31 of the year in question the lumber was estimated and identified by being marked as sold to petitioner, whose representative had inspected it; that the petitioner was required by the contract to furnish the cars for shipments; and that payment made in January, 1921, was made in advance of shipment. The fact that the quantity and quality of the lumber in question was ascertained by an estimate and that the lumber was identified seems not to be an affirmative indication that title is intended to pass. On the contrary, the cases cited by petitioner upon *731 the point, as well as other cases examined, treat such ascertainment and identification as a condition precedent to the passage of title, but not as evidence of intention to pass title unless they are the last act required of the seller to put the goods in a deliverable state constituting an appropriation of goods to the contract. In cases where they are the last acts, delivery being mere acquiescence in the buyer taking the goods, title passes by such appropriation as in *2556 See also . Those cases are not analagous to the f.o.b. contract under consideration, the terms of which require not merely a formal delivery but a substantial affirmative act of delivery.
Nor does the fact that petitioner was required to furnish cars for shipment in any wise detract from the force of the f.o.b. provision. To our mind this provision merely permits the seller to consider petitioner's failure to provide cars as a breach of contract leaving the seller free to make other disposition of his product. There is nothing in the provision indicating the seller's intent to pass title or petitioner's intent to waive f.o.b. delivery. In the cases cited and relied upon by petitioner in this regard, the buyer could load and ship the goods at will without consulting the seller. We are not impressed by the contention that payment was made prior to shipment. It is true that payment made in advance is evidence, perhaps not so strong as delivery, but entitled to considerable weight, of the intent to pass title. Williston on Sales, vol. 1, p. 452; *2557 ; ; . However, since payment was not actually made until after the close of the year in question, we are unable to perceive the pertinency of petitioner's contention except as such payment may reflect upon the intent existing prior to the close of the year.
We are thus led to the conclusion that it was not the intention to pass title to the lumber in the yard at Thompson unless the correspondence between the parties in the closing days of the year evidence such intention notwithstanding the contract requirement that the seller load the lumber on board cars. Respondent urges that said letters were written for income-tax purposes, and should, therefore, be disregarded. This position disregards the fact that men are often led to legitimate action by income-tax considerations. We do not understand the respondent's contention to be that fraudulent means of tax evasion was intended by the parties. Accordingly, it is not the motive but the effect of the correspondence that we must consider.
Does*2558 this correspondence show the intention of the parties to the contract to pass title? On December 23, Chesbrough wrote the petitioner indicating his desire that settlement be made for the lumber *732 in question so that proper entries could be made after the first of the year. Undoubtedly this indicated a desire to change the position of the parties with respect to the lumber within the short space of time left between the date the letter was written and time for closing and opening the books. Delivery of the lumber being then past due and a breach, if any, having already occurred, it seems the desired change in the status between the parties must be either action on the breach or completion of the sale. There is no evidence that action on the breach was in contemplation. On the contrary, the letter called upon petitioner to adjust a settlement in view of the approach of the end of the year. That a settlement was not expected as a condition to change of status is indicated by the provisions for credit in the contract itself and in the subsequent letter of December 29 in which Chesbrough submits a statement and asks payment though the adjustment of a settlement referred*2559 to in the former letter had not been made. The payment requested in advance of his completion of the contract in the later letter indicates at least willingness that title pass by way of completion of the sale for, as matters theretofore stood, Chesbrough, not having shipped, was not in a position to demand payment. When considered together with the letter of January 5, which refers to the lumber as belonging to petitioner, we think the letters of December 23 and 29 show an intent on the part of Chesbrough to pass title before the close of the year.
Petitioner's letter written in answer to Chesbrough's letter of December 23, clearly interprets the latter communication as expressing a desire on the part of Chesbrough to complete the sale before the close of the year. It is equally clear that petitioner wished the sale closed so that it might take the lumber into its inventory as of the close of the year. It seems apparent from this correspondence that both parties considered the contract one to sell rather than a completed sale and took the steps they thought necessary to make the sale complete.
Had the lumber been burned at any time after December 29 could the petitioner*2560 have denied his liability therefor? We think not. The presumption that the parties did not intend to pass title until there was an f.o.b. delivery must yield to the contrary intent expressed by the parties.
The contract between petitioner and the White Marble Lime Co. is in most respects similar to the contract above discussed. Substantially similar contentions, so far as applicable, were advanced by the parties hereto in support of their respective positions. It is unnecessary to further consider the arguments and restate our conclusions *733 in detail. The principal distinction between the terms of the contract is in the terms of payment. The terms of the White Marble Lime Co. are not entirely clear in this regard. However, we construe the second sentence of the second paragraph of such contract to mean that settlement must be made when the lumber is estimated and the piles marked as sold to the petitioner if orders for shipment were not given by petitioner for shipment when the lumber was ready to be shipped. As the lumber in question was so estimated and marked up at the close of the year, we agree with petitioner that petitioner could have been billed for it*2561 at any time. But we can not agree with petitioner's contention that such a liability was the equivalent of payment, and as such, strongly indicative of the intent to pass title when that liability arose. We have recognized in our discussion of the other contract that payment before shipment is weighty evidence of intent to pass title before shipment. Such intent is an inference from the fact of advance payment. The inference the petitioner would have us draw has no such factual basis.
In this contract, as in the other one, the presumption of intent arising from the f.o.b. provision must govern, unless the correspondence taking place between the parties clearly indicates the contrary intent to pass title before the close of the year. Let it suffice to say upon this point that the letters from the White Marble Lime Co. were written after the close of the year in question. Any intent to pass title shown therein was expressed after the close of the year. That being true, we must reject petitioner's contention that the title to the lumber in pile covered by this contract passed to petitioner before the close of the year.
There remains the alternate contention that if the title*2562 is held not to pass, then an abnormal condition requiring special assessment exists. We think the contention without merit. Congress made provision for allowances in the event of losses by means of deductions in the year in which they were sustained, and in certain instances in other years. Having thus specifically granted deductions for losses in designated years, we can not ascribe to Congress an intent to permit taxpayers allowances under other and more general provisions for so-called losses not falling within the specified classes and in years other than those designated.
The deficiency will be recomputed in accordance with this opinion and the stipulation between the parties.
Judgment will be entered on 15 days' notice, under Rule 50.
Considered by MORRIS and MURDOCK.