*3756 The exchange of certain assets by the petitioner for the total outstanding capital stock of a new corporation resulted in no gain or loss.
*648 Income and profits taxes for the calendar year 1919, in the amount of $1,721.39, are in controversy. A number of allegations of error were made, but all were withdrawn save one, which alleged error on the part of the Commissioner in increasing income by $3,815.66 as a profit from a certain transaction which was either an intercompany transaction between two affiliated corporations or a transaction which resulted in no profit to the petitioner.
FINDINGS OF FACT.
The petitioner was incorporated under the laws of Indiana in 1915. Its principal office is at Evansville in that State. The par value of its authorized capital stock, all of which was outstanding, was $25,000, of which $12,600 was held by A. B. Canter and the remainder was controlled and voted by R. H. Pennington, who owned the stock either in his own name or in his wife's name. The petitioner was engaged in the wholesale fruit and produce*3757 business.
In August, 1919, it was decided to organize a separate corporation to be known as the A. B. Canter Co., to take over the petitioner's *649 jobbing business. The petitioner was to retain its car lot or brokerage business. This new corporation was organized with an authorized capital stock of $40,000. It began business under the management of A. B. Canter on September 1, 1919. The petitioner then transferred the following assets at the following book values to the A. B. Canter Co. in exchange for the latter's stock of the par value of $23,500:
| Accounts receivable | $10,395.52 |
| Automobile trucks | 3,500.00 |
| Furniture and fixtures | 1,500.00 |
| Merchandise inventory | 5,125.79 |
| Cold storage equipment | 2,955.29 |
| Cash | 23.40 |
| Total | 23,500.00 |
At the time the petitioner transferred these assets to the A. B. Canter Co. for stock, the latter company had no other stockholders. Later it issued other stock for notes and other property.
The following table shows the year of acquisition, the cost, and the cost less depreciation to date of transfer of the above assets:
| Item. | Year of acquisition. | Cost. | Cost less depreciation. |
| Automobile trucks | 1916 | $4,844.00 | $2,240.00 |
| Furniture and fixtures | 1916 | 1,263.50 | 463.25 |
| Do | 1917 | 227.90 | 74.14 |
| Storage equipment | 1918 | 2,955.29 | 2,462.74 |
*3758 The Commissioner determined that in addition to the above assets the petitioner had sold and transferred to the A. B. Canter Co. a stable acquired in 1916 at a cost of $2,655.69, which cost on the date of sale had been reduced by depreciation to $2,363.56, and horses and wagons acquired in 1916, at a cost of $2,730.57, which cost on the date of sale had been reduced by depreciation to $1,365.29, making a total depreciated cost of all the assets transferred of $9,436.13. He further determined that for these assets the petitioner received $23,500 par value of the A. B. Canter Co. stock and $5,296.50 in cash, making a total consideration of $13,251.79, or a gain of $3,815.66.
The petitioner did not receive any cash from the A. B. Canter Co. in exchange for the assets which it transferred to that company and these assets did not include the stables or the horses and wagons. The depreciated cost of the stables was $2,363.56 and that of the horses and wagons was $1,365.29. The stables were sold to the Ideal Dairy Co. for $3,850, and the horses and wagons were sold for $1,446.50. These two sales resulted in a profit to the petitioner of $1,567.65.
*650 OPINION.
MURDOCK: *3759 The evidence indicates that on September 1, 1919, the A. B. Canter Co. began operations with the assets received from the petitioner, as sole consideration for which it had issued to the petitioner capital stock of the par value of $23,500. It did not receive any other assets and it did not issue any other stock until some time thereafter. The fair market value of the assets transferred did not exceed their cost less depreciation to the time of transfer. Under such circumstances, no gain or loss to the petitioner resulted from this transaction.
The Commissioner correctly determined that the petitioner made a profit from the sale of its stables, horses and wagons, although he was in error as to the amount of this profit and as to the identity of the person who purchased the assets. We have found as a fact the taxable profit realized by the petitioner from the sale of the stables, horses and wagons.
Judgment will be entered in accordance with the foregoing opinion on notice of 15 days, under Rule 50.