*2762 1. Where a former decision of the Board is neither pleaded nor introduced in evidence, and where it is stipulated that a question of law is submitted to the Board for decision, and where it is asserted for the first time in a brief filed by counsel that the decision of such question is res adjudicata, held that such contention has no merit.
2. A contract to purchase and sell gas held to be "tangible property" as that term is defined in section 325(a) of the Revenue Acts of 1918 and 1921.
*951 These proceedings were submitted for a final decision upon a stipulation which will be set forth in our opinion.
Docket No. 14185 involves the redetermination of deficiencies in income and profits taxes for the years 1920 and 1921 in the respective amounts of $65,036.93 and $8,133.68.
Docket No. 17704 involves the redetermination of a deficiency in income tax for the year 1922 in the amount of $1,367.74.
In its petition in Docket No. 14185, petitioner alleges that respondent erred (1) in reducing petitioner's deduction*2763 for depreciation for 1920 by the sum of $44,696.37; (2) in reducing petitioner's deduction for amortization of contracts for 1920 by the sum of $43,500.00; (3) in reducing petitioner's invested capital for 1920 by the sum of $58,211.17, alleged to be additional taxes for 1919 due from petitioner to the United States and chargeable entirely to surplus, which alleged additional taxes were in themselves erroneously asserted and no part of which was at any time due; (4) in reducing petitioner's invested capital for 1920 by $957,312.50, through the process of deducting $1,200,000 representing common stock disallowed and adding $242,687.50 representing contracts restored by Bureau rulings in prior years; (5) in reducing petitioner's deduction for depreciation for 1921 by the sum of $53,586.92; and (6) in reducing petitioner's deduction for amortization of contracts for 1921 by the sum of $43,500.
In its petition in Docket No. 17707, petitioner alleges that respondent erred (a) in reducing petitioner's deduction for depreciation *952 for 1922 by the sum of $73,474.42 and (b) reducing petitioner's deduction for amortization of contracts by the sum of $43,500.
Under each docket*2764 number respondent filed an amended answer in which he alleged (1) that the contract acquired by petitioner at organization in 1914 for its capital stock was intangible property within the meaning of that term as recited in section 326(a)(4) of the Revenue Act of 1918, and (2) that 25 per centum of the par value of the total stock or shares of the corporation outstanding on March 3, 1917, was $425,000.
In accordancee with the stipulation above referred to we make the following findings of fact.
FINDINGS OF FACT.
The par value of the total stock of petitioner outstanding on each of the following dates, to wit, March 3, 1917, January 1, 1920, and January 1, 1921, was $1,700,000. The facts found in the "findings of Fact" in , are made a part of these findings of fact to the same extent as though set forth in detail herein.
OPINION.
MILLIKEN: As set forth in our opening statement, these proceedings were submitted upon a stipulation which was signed by counsel for each party. The stipulation reads:
These causes now appearing upon the day calendar for trial on December 12, 1928, and the petitioner being*2765 willing to abandon its contentions with respect to depreciation on pipe line and compressor station, leaving in issue only the question of proper deductions for exhaustion of petitioner's contract with the Arkansas Natural Gas Company, The Texas Company and the Southwestern Gas and Electric Company, and the proper amount to be included in invested capital on account of that contract, and the attorneys being desirous of submitting these issues without oral argument, it is hereby
STIPULATED that the Board may consider these cases submitted upon the pleadings filed in the above-entitled cases and upon the findings of fact adopted by the Board in Reserve Natural Gas Company of Louisiana v. Commissioner, Docket Nos. 8704 and 9006, reported in , and the facts set forth in the following paragraph:
It is further stipulated and agreed that the par value of the total stock of the petitioner outstanding on each of the following dates, to wit: March 3, 1917, January 1, 1920 and January 1, 1921, was $1,700,000.00.
Counsel for the parties join in moving that the Board allow forty-five days for filing briefs.
*2766 There is nothing in the pleadings in these proceedings, nor in the evidence, which was stipulated, that indicates in the slightest degree that we are in any way precluded from determining whether the contract set forth in our findings of fact and referred to in the above stipulation is tangible or intangible property within the meaning of *953 section 325(a) of the Revenue Acts of 1918 and 1921. A reading of the stipulation discloses that it was specifically stipulated that there was left for our decision the question of "the amount to be included in invested capital on account of that contract, * * *." Notwithstanding that petitioner through its counsel has stipulated the value of the contract involved and that the Board may determine the proper amount to be included in invested capital on account of said contract, and notwithstanding the fact that the only question thus left open in this respect is whether such contract was tangible or intangible property, petitioner's counsel asserts in his brief that we are precluded from making such a determination for the reason that this question is res adjudicata by reason of our decision in *2767 . It is needless to point out that under these circumstances counsel for respondent have not discussed this question. They have discussed and argued the one question submitted on this point, to wit, whether the contract is tangible or intangible property.
Without discussing or deciding whether we are barred by our decision in the former proceeding, if that question was properly before us, in view of the fact that the issue whether the contract was tangible or intangible property was not distinctly put in issue and directly decided in that proceeding (see , and ); and without deciding or discussing the question how far the doctrine of res adjudicata is applicable in tax proceedings, such as the instant proceedings (cf. , and ); it is only necessary to point out that the effect of our former decision is not raised by the pleadings in these proceedings. Further, *2768 petitioner is estopped by the stipulation from raising this question. 34 C.J. 749. There is no merit in this contention and we will now pass on to the question, which by the stipulation is submitted to us for decision and which is whether the contract involved is tangible or intangible property within the meaning of section 325 of the Revenue Acts of 1918 and 1921. The pertinent part of these sections reads:
SEC. 325. (a) That as used in this title -
The term "intangible property" means patents, copyrights, secret processes and formulae, good will, trade-marks, trade-brands, franchises, and other like property;
The term "tangible property" means stocks, bonds, notes, and other evidences of indebtedness, bills and accounts receivable, leaseholds, and other property other than intangible property. (Italics supplied.)
It is at once apparent that the above definition of the term "tangible property" includes classes of property which at common law *954 would be classified as intangibles. Bouvier defines the term "tangible property" as follows: "That which may be felt or touched; it must necessarily be corporeal, but it may be real or personal." Thus we find that*2769 the common law concept of tangible property must to a large extent be disregarded. The statutory definition of "intangible property" includes only certain specified classes of property and "other like property." On the other hand the statutory definition of the term "tangible property" specifically includes certain classes of property which at common law would be termed intangible property. It further includes "other property other than intangible property." The term "tangible property" is the general term and the term "intangible property" is the exception.
Before we can find that the contract involved is an intangible, we must find that it partakes of the nature of a patent, or of a copyright, or of a secret process or formula, or of good will, or of a trade-mark, or of a trade brand, or of a franchise. Gas can not be held to resemble any one of these classes of property. Nor does a contract to purchase and sell gas bear any resemblance to any one of the enumerated classes of intangible property. See . We are, therefore, of opinion that since the contract bears no resemblance to any one of the enumerated classes of intangible*2770 property, it must be held to be "tangible property" as that term is defined in section 325(a) of the Revenue Acts of 1918 and 1921. This conclusion is in harmony with article 223 of Regulations 45 and 62, which classifies casing-head gas contracts as tangible assets and with respondent's ruling in S.M. 4116, Cumulative Bulletin IV-2, p. 233.
We are, therefore, of opinion that the stipulated value of the contract in September, 1914, when it was paid in for stock, to wit, $1,200,000, should be included in the computation of invested capital and should be used for the computation of exhaustion allowances.
Reviewed by the Board.
Judgment will be entered under Rule 50.
GREEN concurs in the result.