*593 Petitioner purchased in 1918, 1919, and 1931 at a unit cost certificates of bank stock, having thereon an endorsement entitling the registered holder thereof to share equally and ratably with all other holders of like certificates similarly endorsed, according to their several interests, in dividends or profits, and in case of dissolution, in the distribution of the capital, of another corporation, the Security Co. The endorsement provided that "the interest in the Security Company attached to any share of the Bank stock shall be alienable, only in connection with the transfer of such Bank stock", and none was otherwise disposed of prior to the dissolution of the Security Co. on November 29, 1933. Upon said dissolution, petitioner received declarations of interest in the distribution of proceeds of the Security Co. and sold them in December 1933. Held, that the character of endorsement placed on the bank stock did not render impracticable the apportionment of the cost of the component elements making up a unit of bank stock and the endorsement thereon of beneficial interest in the Security Co. A practicable allocation of cost determined.
*1159 This proceeding is for a redetermination of an alleged deficiency of $671.94 in income tax for the calendar year 1933, asserted in respondent's deficiency notice, dated November 2, 1934. The petition herein was filed December 6, 1934.
The only errors assigned are as follows: (1) "The respondent erred in disallowing as a deduction losses aggregating $6,364.79 sustained by the petitioner upon the sale of declarations of interest representing an interest of 19 undivided parts of a total of 100,000 parts in the proceeds of dissolution of First Security Company", and (2) "The respondent erred in disallowing as a deduction contributions of the petitioner in the amount of $125 to certain charitable organizations." The losses (1) amounting to $6,364.79, were disallowed by the respondent on the ground that it was impracticable to allocate or apportion fairly to the declarations of interest a portion of the unit cost of certificates representing stock of the First National Bank of the City of New York and stock of the First Security*595 Co.
The second assignment of error is no longer in dispute, being conceded by the respondent.
A stipulation filed herein is adopted as a part of our findings of fact, and set forth literally or in substance herein, in connection with other findings of fact on the evidence, only to the extent found necessary for the understanding and determination of the issue involved.
FINDINGS OF FACT.
The petitioner is an individual, residing in Maplewood, New Jersey. The income tax liability of petitioner for 1933 as determined by the respondent was $840.73, and $168.79 thereof was paid by petitioner on March 12, 1934.
*1160 At all times since February 1908 the First National Bank of the City of New York (hereinafter referred to as the Bank) has been a corporation organized under the National Banking Corporation Act and has had outstanding 100,000 shares of stock of a par value of $100 each.
On February 14, 1908, George F. Baker and others, as trustees, and J. Pierpont Morgan and others, as stockholders of the Bank, entered into an agreement for the organization and maintenance of a business corporation under the laws of the State of New York, which might acquire, hold, *596 and sell securities and do other things which the Bank, on account of its limited powers, could not itself do. In accordance with said agreement, the First Security Co. (hereinafter referred to as the Security Co.) was organized under the laws of the State of New York with capital stock of $10,000,000, divided into 100,000 shares of a par value $100of each.
Also, in accordance with said agreement, a special dividend of $10,000,000 in cash was declared out of the surplus or net profits of the Bank in May 1908, and was thereupon assigned and paid to the trustees under the agreement and used by them in payment of the capital stock of the Security Co. All of the stockholders of the Bank presented their certificates of Bank stock for endorsement in the form provided in the agreement and they were so endorsed, as follows:
The registered holder of the within certificate is entitled, for and in respect of each and every share of stock of the First National Bank of the City of New York represented thereby, to share equally and ratably with all other holders of stock certificates of the Bank similarly endorsed, according to their several interests, in the dividends or profits, and, in*597 case of dissolution, in the distribution of the capital, of the FIRST SECURITY COMPANY, a corporation of the State of New York organized in pursuance of a certain written Agreement dated February 14th, 1908, between George F. Baker and others, Trustees, and J. Pierpont Morgan and others, Stockholders: such interest of the owner of the within certificate, and of all other like certificates, similarly endorsed, being subject to all the terms, conditions and limitations of said agreement; such ratable interest to be sold or transferred ratably only by the transfer upon the books of the Bank of one or more of the shares of the stock in the Bank represented by a Bank stock certificate bearing this endorsement; and all of the interest in and to or in respect of said Security Company or its capital stock, represented by a Bank stock certificate bearing this endorsement, shall pass ratably with and only with the transfer of such shares of the Bank represented by such Bank stock certificate, and upon transfer thereof upon the books of the Bank; and an interest in the Security Company attached to any share of the Bank shall be alienable, only in connection with such transfer of such Bank stock.
*598 No holder of the within certificate or any transferee of any share thereby represented shall be entitled in lieu thereof to demand or receive from the Bank a new certificate except with this endorsement thereon; and a transfer of any share of Bank stock represented by the within Bank stock certificate *1161 shall be made by any holder thereof only to a transferee accepting therefor a new certificate bearing this endorsement.
No right to vote upon or in respect of any stock of the Security Company passes to or shall be exercised by the holder of the within certificate, such voting right being reserved to and by the Trustees or their successors.
At all times after said endorsement and until the termination of the agreement, November 29, 1933, said agreement was in full force and effect and each certificate of Bank stock carried such an endorsement.
The Bank stock has been actively traded in by unlisted securities dealers and brokers on the so-called "over the counter" market since prior to 1908. From the formation of the Security Co. until its dissolution, all certificates of Bank stock which were sold bore the aforesaid endorsement, and all quotations of prices for*599 Bank stock were for certificates of stock bearing that endorsement.
The agreement between the stockholders of the Bank and George F. Baker and others, as trustees, recites that the agreement shall continue to be operative for five years and thereafter until terminated by the written direction of the holders of two-thirds in interest of the stock certificates. It also provides for ratable distribution of the shares of stock of the Security Co. upon the termination of the agreement. The agreement further provides that a copy thereof shall be on file in the office of the Security Co., open to inspection by any stockholder thereof, or by any party, or the transferee of any party, to the agreement, and that any and every registered holder of the stock of the Security Co., or of an endorsed bank stock certificate shall be entitled to become a party to the agreement.
The balance sheet of the Security Co. at the close of business December 31, 1918, showed as assets, investments of $32,280,706.55; for the year 1918 were $3,457,000, while the earnings of the Security $75,157,446.44.
At all times from the formation of the Security Co. the earnings of the Bank and of the Security Co. *600 were separately computed and yearly statements thereof are stipulated. The earnings of the Bank for the year 1918 were $3,457,000, while the earnings ofthe Security Co. for the same year were $1,922,000. In 1919 the earnings of the Bank were $5,615,000, while the earnings of the Security Co. were $2,010,000. In 1931 the earnings of the Bank were $5,527,000, while the earnings of the Security Co. were $2,548,000. Dividends were at all times separately paid to the holders of shares in the Security Co. In 1918 the Security Co. paid dividends of $3,000,000, while the Bank during the same year paid dividends of $2,000,000. In 1919 the Security Co. paid $2,500,000 dividends and the Bank paid $2,500,000. In 1931 the Security Co. paid $3,000,000 dividends and the Bank paid $7,000,000 dividends.
*1162 The net asset values (exclusive of good will and other intangibles, if any) of the Bank and of the Security Co. on the dates of purchase by petitioner are as follows:
| Date of purchase | Bank | Security Co. |
| December 26, 1918 | $38,032,000 | $27,421,000 |
| December 16, 1919 | 37,243,000 | 29,020,000 |
| September 16, 1931 | 107,485,000 | 3,159,000 |
The reports of the condition*601 of the Bank made on December 31, 1918, December 31, 1919, and September 29, 1931, contain no reference to the Security Co.
At all times herein referred to, the Security Co. was operated as an investment company and its assets consisted principally of highgrade stocks, together with small amounts of bonds, loans, and cash. Investments were always made with a view to long-term appreciation and yield rather than to trading profits and consequently its income consisted principally of dividends. During the entire period of its existence, the directors of the Security Co. were, in all material respects, the officers and directors of the Bank, so that the Security Co. enjoyed the benefits of the same management as the Bank. From 1909 to 1933 the few investments acquired from the Bank were taken over at the fair market value thereof at the time of transfer. All loans by the Bank to the Security Co. were at the prevailing rates of interest for comparable loans and were adequately secured. Balance sheets of the Bank and Security Co. as of the close of business December 31, 1918, December 31, 1919, and September 30, 1931, are included in the stipulation filed, and are considered but not*602 deemed material to be here set out.
During the entire period of the existence of the Security Co., no rights to subscribe to additional stock nor stock dividends were issued by either the Bank or the Security Co., and the capital of the Bank and the Security Co. remained the same from 1908 until the dissolution of the Security Co. in 1933.
Because the "Banking Act of 1933" required national banks to divorce their securities affiliates, the Security Co. was dissolved in accordance with the laws of the State of New York on November 29, 1933, and subsequently on the same day the trust created under the agreement of February 14, 1908, was terminated. Thereafter declarations of interest in the distribution of the proceeds of dissolution of the Security Co. (hereinafter referred to as declarations of interest), were issued by the trustees under said agreement to the stockholders of the Bank in lieu of the aforesaid endorsement, which was then removed from the Bank stock certificates. An interest in *1163 the proceeds in dissolution of one undivided part of a total of 100,000 parts was issued for each of the 100,000 shares of Security Co. stock previously represented by the*603 endorsement on the back of the Bank stock certificates.
No actual or constructive distribution of the assets of the Security Co. in dissolution was made prior to January 30, 1934. The proceeds of liquidation of the Security Co. amounted to $2,018,523.82 and were delivered in liquidation to the trustees on or after January 30, 1934.
Petitioner purchased certificates of Bank stock with said Security Co. endorsement and in exchange therefor, upon the dissolution of the Security Co. and the termination of the agreement, as aforesaid, received on December 9, 1933, certificates of Bank stock without said endorsement and declarations of interest, as follws:
| Date of purchase | Bank shares bearing endorsement | Unit cost | Total cost | Bank shares without endorsement | Declarations of interest in Security Co. |
| 12/26/18 | 1 | $950 | $950 | 1 | 1 |
| 12/16/19 | 15 | 900 | 13,500 | 15 | 15 |
| 9/16/31 | 3 | 3,160 | 9,480 | 3 | 3 |
The respective net asset values of the Bank and Security Co. and the percentage of the combined net asset value which the value of each represented on the dates on which the petitioner purchased Bank stock with the Security Co. endorsement are shown in the*604 record. The cost of the units so purchased was apportioned by petitioner between the Bank stock and the declarations of interest in the Security Co. in proportion to such respective net asset values on the dates of purchase, and on the sale of the declarations of interest he computed losses thereon as follows:
| Date of sale | Declarations of interest in Security Co. | Total cost | Percentage Security Co. | Cost apportioned thereto | Selling price | Loss |
| 12/28/33 | 1 | $950 | 41.894 | $398.56 | $12.00 | $386.56 |
| 12/27/33 | 15 | 13,500 | 43.796 | 5,912.33 | 168.75 | 5,743.58 |
| 12/28/33 | 3 | 9,480 | 2,855 | 270.65 | 36.00 | 234.65 |
| Total | 6,364.79 |
The net asset value of the Bank on the quarterly dates from 1903 to the formation of the Security Co. in 1908 and the net asset values of the Bank and Security Co. and the percentage of the combined net asset value which the value of each represented on quarterly dates from July 1, 1908, to September 30, 1933, are shown in the stipulation. These net asset values represent the amounts by which *1164 the respective assets of the Bank and Security Co., at their fair market value, exceeded their respective liabilities*605 exclusive of capital stock, and are exclusive of good will and other intangibles, if any.
The earnings of the Bank during the period 1903 to the formation of the Security Co. in 1908 and the respective earnings of the Bank and Security Co. from 1908 until 1933, inclusive, are also shown in the stipulation, as are the dividends distributed by the Bank and Security Co. from 1908 to 1933.
The quotations of bid and asked prices of Bank stock without the Security Co. endorsement on quarterly dates during the years 1903 to January 1908, inclusive, and for the Bank stock with the Security Co. endorsement on quarterly dates during the period April 4, 1908, through 1933, inclusive, as reported in the Commercial and Financial Chronicle, are likewise set out in schedule made part of the stipulation. The fair market value of such units was the mean of the bid and asked prices on such dates.
The market value of the unit of the Bank and Security Co. stock at all times exceeded the market value of the Bank stock alone, and the excess of the value of the unit over the value of the Bank stock represented the value of the Security Co. stock, and it was practicable to apportion fairly the cost*606 or market value of the unit of the Bank and Security Co. stock between the two stocks by valuing the Bank stock and subtracting that value from the value of the unit.
The cost per share of the declaration of interest in the Security Co. as of December 26, 1918, December 16, 1919, and September 16, 1931, was $458, $344, and $1,281, respectively.
OPINION.
DISNEY: The issues presented for our determination are (1) whether it is practicable to apportion fairly to the declarations of interest sold by the petitioner a part of the unit cost of his stock in the Bank and in the Security Co., and (2) if so, what cost should be apportioned to such declarations of interest, otherwise designated herein Security Co. stock.
The petitioner contends that it is practicable to apportion fairly the cost of the units of Bank stock and Security Co. stock on the basis of their respective values at the dates of purchase (1) on the basis of the respective asset values of each stock and (2) on the basis of their respective values, as appraised by the expert witnesses, who testified at the hearing.
The Commissioner controverts both of petitioner's contentions.
*607 The statute applicable to the issues involved herein is found in the Revenue Act of 1932, sections 111(a) and 113(a). That act and prior acts provide for an apportionment of cost under certain circumstances, the method of apportionment of cost of property received *1165 in connection with tax-free distributions being left to rules and regulations prescribed by the Commissioner. See ; affd., , and authorities therein cited. Article 58 of Regulations 77, which is quoted by both petitioner and respondent herein, provides in part as follows:
* * * Where common stock is received as a bonus with the purchase of preferred stock or bonds, the total purchase price shall be fairly apportioned between such common stock and the securities purchased for the purpose of determining the portion of the cost attributable to each class of stock or securities, but if that should be impracticable in any case, no profit on any subsequent sale of any part of the stock or securities will be realized until out of the proceeds of sales shall have been recovered the total cost.
*608 Inasmuch as both parties have quoted said article, they seem to be in accord that this is a case arising thereunder. No regulation seems to provide definitely for an apportionment of cost under the exact circumstances arising in this case, but it comes within the general principle embodied in the above statute and regulations.
In the instant case, during all of the period from 1908 to 1933 there were two separate corporations, a bank and an investment company, with separate assets, liabilities, income, dividends, and businesses.
The Security Co. commenced business with a capital of $10,000,000 in cash, which was largely invested in high-grade stocks paying large amounts in dividends. Schedules of net asset value, earnings and dividends of the Security Co. and of the Bank were stipulated and were known to and considered by the witnesses who as experts expressed opinions, as indicated in our findings of fact.
The Bank stock prior to the formation of the Security Co. and thereafter bearing the Security Co. endorsement, the record shows, had been traded in on the "over the counter" market in New York City and the market price of the units had at all times exceeded the combined*609 net asset values of the Bank and Security Co.
By the testimony of witnesses and other evidence in the record, it was, in our opinion, shown that the fair market price of the aforesaid units at all times exceeded the market value of the Bank stock if considered separately and so offered for sale. Each of the two stocks, or interests, at all times had a value. The aforesaid agreement between stockholders that neither stock should or could be sold separately did not have the effect of depriving either stock of its value nor, in our opinion, did the agreement make the determination of their separate values impossible or impracticable. Cf. ; ; certiorari denied, ; .
*1166 There were no actual sales of either Bank stock or Security Co. stock separate from the other at any time prior to December 1933, so that it is impossible to determine the values of either stock on the basis of sales. The absence of sales, however, in our opinion, does not necessarily make*610 impossible or impracticable the determination of the fair market value of the separate stocks or interests or their value for the purpose of apportionment.
We have heretofore held: "The absence of active trading in a stock does not necessarily show lack of fair market value, and under the circumstances other evidence, including evidence as to the intrinsic value of the assets back of the stock, should be considered in determining whether the stock had a fair market value." ; affd., ; certiorari denied, . See also ; affd., ; ; certiorari denied, .
The unit here involved was created by a voluntary agreement and consisted of two separate interests in corporations possessing different powers, one organized because the powers of the other were too limited to permit it to do certain business desired to be done by parties interested in both corporations.
*611 In , the (961-966), considered the effect of a restrictive agreement imposed by a banker's syndicate which, it was contended, prevented realization of income because by the agreement certain corporate stock could not be sold. After reviewing a number of cases involving restrictive agreements, we concluded that the restrictive agreement did not militate against the fact of value in the stock. We emphasized the fact that the restriction was voluntary, and temporary, to some extent, during the life of the banker's syndicate. We have the same principle in the instant case. The restrictive agreement herein was wholly voluntary, entered into by the stockholders of the bank and, through trustees, by the stockholders of the Security Co.; likewise it was temporary, for a period of five years and thereafter until terminated by a vote of the holders of two-thirds of the stock. Obviously, being voluntary, the restrictive agreement could have been terminated at any time by the agreement of those who made it, but after five years it required only a two-thirds vote. The opinion of the Circuit Court in *612 , reversing this Board, on this point, does not suggest that the Board's conclusion was incorrect as to voluntary agreements, but pointed out that the agreement was, in fact, an involuntary one. We conclude then that that decision agrees that a purely voluntary agreement, as in the instant case, would, as we held, not prevent the imposition of the tax upon any profit calculated *1167 upon a value of the stock, notwithstanding the agreement was restrictive against sale.
In , we held that shares of stock received in a reorganization under an agreement stamped on the certificates not to sell them for a year without a certain banker's consent were not without fair market value for purposes of computing taxable profit on an exchange. If in that case there was fair market value for computing taxable profit, then obviously there is fair market value for purposes of arriving at a basis in the present case where the restrictive agreement is so remarkably similar to that in the cited case.
*613 , reversed this Board in a case involving income tax on profits from sale of common and preferred stock in units consisting of one share of preferred and two shares of common. The constituents of these units could not be sold separately because of a prohibition by the Ohio Commissioner of Securities, to which the parties had agreed. The taxpayer, therefore, contended that apportionment of value between the preferred and common stock was impracticable, relied upon regulations, the same in effect if not in words as those involved herein, and contended, as herein contended by the respondent, that gain or loss should not be computed until the final sale of all the stock. The Commissioner took the view that the common stock had no value - which, of course, entailed determination of proportionment values. We found, as a matter of fact, that no part of the consideration was paid for the common, and assigned as cost to the preferred the entire consideration given for both, but the Circuit Court said:
We are satisfied that some part of the total price paid for the stock units was paid for the common stock - what part we are unable*614 to determine on the record here. Upon another hearing it may be practicable to obtain data or facts upon which a fair apportionment of cost as between the two classes of stock may be made, but, if it should not be, then, under article 39 of Regulation 45, the petitioner will not be chargeable with any profits until he shall have recovered the entire purchase price.
It is obvious, therefore, that the above court considered the very situation herein involved - but concluded that evidence, data, or facts, should be sought as a basis for a fair apportionment of cost. These data and facts were sought and presented before this Board in the instant case. The cited case is authority for a conclusion that despite the restrictive agreement herein, a proper inquiry was made by this Board into the practicability of apportionment.
It is only because the unit was in fact separated and one of its constituent parts sold that the present issue arose. The evidence clearly indicates that each of the component parts of the unit had a monetary value; one part of the unit being the stock of a long *1168 established bank and the other the stock of, or an interest in, an important investment*615 company.
The instant case is not like the case of , which is cited and relied on by the respondent. In that case, the "Petitioner purchased both the bonds and coupons after the latter had matured and were in default." The principal of the bonds and the matured interest coupons in default, we held, were not "different classes of property where it is contemplated that an apportionment of costs be made, if practicable." The facts and circumstances in the insant case, with respect to the Bank stock and the Security Co. interest or stock, are quite different from those in the Hewitt case, supra, and the latter is not, therefore, applicable nor controlling.
The only other decision cited by the respondent is , which is also distinguishable upon the facts from the instant case. In the Axton case, supra, there were two different kinds of stock received in exchange for a third kind of stock, but there was no satisfactory basis of comparison of the values of the two types of new shares received and we held that the book value in that particular case was an unsatisfactory basis of*616 comparison, and sated:
* * * Consideration has been given to all of the evidence and it indicates with reasonable certainty that no figure can be satisfactorily fixed upon to represent the value of the class B stock at the time it was received by these petitioners. Under such circumstances the entire old basis should be recovered out of the proceeds and the excess taxed as income as received. * * *
The Axton case does, however, support the introduction and consideration of the opinion evidence upon which the petitioner relied in this case to establish fair market value; for that case shows that opinion evidence of experts was used in an attempt to arrive at a fair market value. The effect of the Axton case is, therefore, that a proper method was used in this case to arrive at the fair market value, although the facts of that particular case, as found by the Board, showed that there was no fair market value of the class B stock therein.
In the instant case the situation is quite different, as our findings of fact show, and "It is well settled that where property is acquired en bloc or en masse and subsequently sold in lots or parcels, a computation of gain or*617 loss must be made upon each separate sale and the result reported in the tax return and not held in abeyance or suspense until the entire cost of the property is recovered." . The principle above enunciated, in our opinion, is applicable in the instant case, since it is not impracticable in the circumstances to apportion fairly the cost of the component elements making up a unit of said Bank stock and the endorsement thereon of beneficial interest in the Security Co.
*1169 This case is in all essential particulars the same in principle as ; affd., . Therein the Curtiss Aeroplane & Motor Corporation was reorganized and, instead of stock therein, each stockholder received stock in a new company, the Curtiss Aeroplane & Motor Co., and a certificate of beneficial interest in the Curtiss Assets Co. Later, in 1924, the petitioners sold their certificates of beneficial interest in the Curtiss Assets Co. We approved apportionment of value to the certificate of interest. The certificate of beneficial interest in the Curtiss Assets Co. is not essentially*618 different from the certificate of interest in the Security Co. in this case. In both cases it was a certificate of participation in a company other than the original company. It is true that in the present case there was a prohibition upon alienation separate from the original stock.
Impracticability has been defined as incapable of being effected from lack of adequate means, impossible of performance, not feasible. ; . Also, it has been said that "impracticability" and "impossibility" are of equal legal effect. . We can not believe that it was "impracticable" to arrive at separate valuations upon the Bank stock and the certificate of participation in the Security Co. in this case. Obviously, it was not impossible, not even particularly difficult. The evidence used was competent under the Axton case, supra, and the difference of opinion between the witnesses was no more than indicative of good faith testimony.
In *619 , the taxpyer made the very contention herein made by the respondent, that is, that the entire cost of the old stock must first be recovered, but the court, although, as in this case, there were no actual sales, considered the fact that the business had been extraordinarily successful over a period of several years (very similar to the situation herein) and approved the Board's finding that the apportionment was practicable, citing, among other cases, , wherein the Commissioner did find a basis for value of stock received in exchange for former stock by examination of the average income of the company and appraisal of tangibles and intangibles. The court remarks: "The question is not so much whether the value fixed was right as whether the shares had any 'market value' at all", and refers to the fact that the business was an old, profitable, thoroughly seasoned one, and that although the stock had not been dealt in, there might have been persons familiar with such securities who would have undertaken to appraise them, whose evidence would have been reliable judgment*620 as to their market value. This seems to be substantially what was done in the instant case. *1170 We hold, upon the facts herein, that it was possible and practicable to apportion fair market value to the certificates or declarations of interest at the time of purchase thereof.
The stipulated facts and the testimony furnished, in our opinion, a satisfactory basis for a fair apportionment of the unit cost to the Bank stock and the beneficial interest or stock in the Security Co.
Upon consideration of the entire record and the authorities cited in briefs of counsel, we are of the opinion and hold that a fair apportionment of aforesaid unit cost to declarations of interest in the Security Co. in the particular circumstances of the instant case is practicable.
Therefore, we are of the opinion and hold the cost per share of the declaration of interest in the Security Co., a of the following dates: December 26, 1918, December 16, 1919, and September 16, 1931, was in the respective amounts of $458, $344, and $1,281; upon which basis the tax will be recomputed.
Reviewed by the Board.
Decision will be entered under Rule 50.
MELLOTT, dissenting: *621 The petitioner purchased a share of bank stock and thereby became entitled "to share equally and ratably with all other holders of stock certificates of the Bank similarly endorsed, according to their several interests, in the dividends or profits, and, in the case of dissolution, in the distribution of the capital" of a security company. The security company had been organized in conformity with an agreement which provided that the "* * * officers of directors of the bank shall be the directors, and, as joint tenants and not as tenants in common, shall be stockholders, in such way, however, that the beneficial interest resulting from such stock (but not the right to vote) may accrue continuously and irrevocably to such persons assenting thereto as from time of time shall be registered stockholders of the Bank or of its successor, severally and respectively, in proportion to their registered holdings of the stock of the Bank or of its successors * * *."
The holding of the majority to the effect that petitioner became a stockholder in the security company, through the purchase of a share of the Bank stock bearing the endorsement set out in the opinion, seems to me to be wrong. He*622 did not buy two separate shares of stock, one in the Bank and one in the security company. He could not do so. He bought a share of Bank stock. That is what was "actively traded in * * * 'over the counter'" and "all quotations of prices for Bank stock were for certificates of stock bearing that endorsement."
If the unit which he bought - the bank stock with the endorsement - had been sold, gain or loss would have been computed upon *1171 its cost. But he did not sell it as a unit. He surrendered it on December 9, 1933, and, in the language of the majority, "in exchange therefor * * * received * * * certificates of Bank stock without said endorsements and declarations of interest." This, it seems to me, is analogous to the situation which the Board had before it in . It was there held that the cost of the exchanged securities should be apportioned to the securities received in the exchange according to the respective market values of the securities at the time received in the exchange. The Circuit Court affirmed, *623 . Cf. I.T. 2302, V-2, C.B. 15. ; affd., ; certiorari denied, . (Rule recognized but not applied for lack of proof.) ; affd., . I.T. 2335, C.B. VI-1, p. 18. ; affd., . (petition to review dismissed, C.C.A., 9th Cir.).
In , we pointed out that while there is no specific provision in the satute directing an apportionment of cost between two or more kinds of property received in a nontaxable exchange (which, it seems to me, is what we have here) still article 1567 of Regulations 62, interpreting the Revenue Act of 1921, must be considered as laying down a principle which is equally applicable in determining gain or loss under subsequent revenue acts. This regulation provides in part as follows:
* * * the proportion of the original cost, or other*624 basis, to be allocated to each class of new securities is that proportion which the market value of the particular class bears to the market value of all securities received on the date of the exchange. * * * [Italics supplied.]
This is certainly a more "practicable" solution of our problem than that adopted by the majority.
ARUNDELL, VAN FOSSAN, and ARNOLD agree with this dissent.