*2885 1. The fair market value of certain lands on March 1, 1913, and at the time they were acquired by the petitioner, determined.
2. The sale of certain lands involved herein, held, to have been made in 1921, not in 1920.
*921 This proceeding is for the redetermination of a deficiency in income and profits taxes asserted by the respondent for the year 1920 by a deficiency letter dated January 21, 1926. The amount of the deficiency as set forth in the deficiency letter is $22,282.40. At the hearing, however, counsel for the respondent stated the deficiency letter contained certain errors and that the deficiency should be $14,769.30. The petitioner alleges that the respondent erred (1) in determining the March 1, 1913Fair market value of certain lands which the petitioner sold in 1920 and, therefore, failed correctly to compute the profit from such sale; (2) in excluding from the *922 petitioner's invested capital for 1920 the value of certain coal lands paid in for shares*2886 of its capital stock, and the amount of certain assessments paid by its stockholders; and (3) in holding the sale of certain real estate was made in 1920 instead of in 1921.
FINDINGS OF FACT.
The petitioner is a corporation organized under the laws of West Virginia with its principal office at Huntington.
In the year 1902 a group of men consisting of C. W. Campbell, U. B. Buskirk, A. R. Wittenberg and J. D. Lowry, decided to purchase a number of separately owned small tracts of coal and timber land lying on Guyan River and Gilbert Creek in Mingo and Wyoming Counties, West Virginia, and to block them into a boundary large enough for development. Campbell was a lawyer residing at Huntington, and he had been engaged in extensive litigation of the titles of these and adjoining lands, and had also purchased and assisted in the purchase of large tracts of land in the same vicinity. Buskirk and Wittenberg were partners in a lumber business and had logged and traded in lands on the Guyan River both above and below the lands mentioned. Lowry had purchased and assisted in the purchase of lands in the vicinity and had acted as land agent for other parties. These men were familiar*2887 with the land they desired to purchase and believed that by reason of such familiarity, their acquaintance with the owners, and Campbell's experience with and knowledge of the titles, they could acquire said lands at a favorable price. They, therefore, in 1902 or 1903, set out to acquire said lands and by 1906 had purchased more than 2,500 acres and paid for the same with their own money, the land so purchased belonging to them in proportion to the amount of the purchase money furnished by each. The purchases were made by the four men named on their own account and not for any other person or for any corporation organized or to be organized.
In 1905 Campbell, Buskirk, Wittenberg and Lowry decided to organize a corporation to hold title to the lands they had purchased, and the petitioner was thereupon incorporated under the laws of West Virginia. In March, 1906, the first two tracts of said lands were conveyed to the petitioner in exchange for shares of the petitioner's capital stock at the rate of one share of the par value of $100 for each two acres of land. Shortly after the petitioner's stock was so issued to Campbell, Buskirk, Wittenberg, and Lowry, they sold some of it*2888 to other men. However, the original group of men continued to purchase additional tracts, in some of which, J. L. Caldwell, who had become a stockholder by buying some of J. D. *923 Lowry's stock, took an interest and furnished part of the purchase money. The proportionate ownership in each tract thereafter acquired varied in accordance with the amount of purchase money which each man elected to and did invest.
After the two conveyances in March, 1906, additional land was conveyed to the petitioner by Campbell, Buskirk, and others, on July 18, 1906, September 12, 1907, and July 22, 1912, for which the petitioner's capital stock was issued to them at the rate of $50 in stock for each acre of land and in proportion to the respective ownerships of each man in each tract so conveyed as determined by the amount originally contributed by each man to the purchase price of the several tracts. None of the conveyances were made until the respective tracts had been fully paid for and the titles thereto perfected. The interests of the several men conveying tracts of land to the petitioner were, as to lands purchased after the first stock issue, never identical with their respective*2889 holdings of the petitioner's capital stock. When Campbell and his associates purchased these additional tracts of land they intended, after paying the purchase money for them and perfecting the titles thereto, to convey them to the petitioner in exchange for shares of its capital stock. The petitioner, however, was not a party to any such intention and there was no agreement between the petitioner on one hand and the men named on the other, that after they acquired the said land they would convey it to the petitioner, or that the petitioner would accept the same and issue its stock or pay money therefor. Several of the stockholders of the petitioner had no part in the purchase of these lands and were not consulted until the lands were offered to the petitioner in exchange for shares of its capital stock.
Taxes and other expenses incident to the ownership of the lands mentioned were paid by Campbell and his associates until such time as they were conveyed to the petitioner. After the lands were conveyed to the petitioner the taxes thereon and expenses incident to ownership were paid by the petitioner. The stockholders of the petitioner paid no cash into its treasury for stock, *2890 and the petitioner paid no cash or money for the lands it bought prior to March 1, 1913, all of such lands being paid for by its stock at the rate of $50 per acre. The petitioner met its expenses, including property and corporation taxes, by assessment upon its stockholders, the total amount of such assessment made prior to the opening of the petitioner's books in November, 1913, being $9,301.99. Except for the amount of such assessments the petitioner's invested capital during the years 1920 and 1921 consisted entirely in the value of the lands conveyed to it in exchange for its capital stock.
*924 The conveyances to the petitioner made as above mentioned by Campbell, Buskirk, Wittenberg, Lowry, and others, prior to March 1, 1913, were as follows:
| Date of deed | Acreage |
| Mar. 1, 1906 | 100 |
| Mar. 6, 1906 | 2,507.34 |
| July 18, 1906 | 533.96 |
| Aug. 12, 1907 | 1,646.03 |
| Feb. 2, 1909 | 1,227.15 |
| July 22, 1912 | 550 |
| Total | 6,364.48 |
The fair market value of these lands at the time they were conveyed to the petitioner was: land conveyed prior to 1912, $32.50 per acre; land conveyed in 1912, $42.50 per acre.
Subsequent to March 1, 1913, and prior to December, 1920, *2891 the petitioner acquired other lands in the amounts and for considerations as follows:
| Date | Acreage | Consideration |
| 1917 | 275.62 | $13,800 |
| 1920 | 901.06 | 45,053 |
| 1920 | 29 | 1,450 |
| Total | 1,205.68 | 60,303 |
In December, 1920, the petitioner owned 6,909.77 acres of land, of which 5,704.09 acres had been acquired from Campbell, Buskirk, and others, prior to March 1, 1913, and 1,205.68 acres had been purchased subsequent to March 1, 1913. Practically all of these lands lay in two tracts, which were known as the "Upper Tract" and the "Lower Tract," and were as follows:
Upper tract.
4,516.68 acres, acquired prior to March 1, 1913.
304.62 acres, purchased after March 1, 1913, for $15,250.
Lower tract.
1,121.95 acres, acquired prior to March 1, 1913.
901.06 acres, purchased after March 1, 1913, for $45,053.
The fair market value on March 1, 1913, of the lands acquired prior thereto, was $42.50 per acre.
At an adjourned meeting of the stockholders of the petitioner held on the 31st day of August, 1912, among other things the stockholders resolved as follows:
On motion, it was resolved that a price of $30 per acre be fixed upon the land in this*2892 company standing in its name, as well as those in the name of C. W. Campbell. There shall be no difference in price between absolute fee lands and mineral fee lands.
It was further resolved that the officers of this company are authorized to sell and convey all of said lands to any purchaser at the price of $30 per acre on or before the 1st of January, 1913, upon terms of payment to be fixed by the officers of this company, cash payment, however, not to be less than one-half, *925 and the deferred payments not to exceed two years and to bear interest at 6%. Any stockholder desiring to retain his undivided interest may do so, provided same is agreeable to the purchaser.
At a special meeting of the stockholders of the petitioner held on April 21, 1914, the following resolution was offered:
Resolved that the president of this company be, and he is hereby authorized and empowered to make sale of the lands of this company any time before the 31st of December, 1914, at not less than $30 per acre on such terms of payment as the president may think advisable, retaining the lien for any deferred installments of purchase money.
He is also authorized to give options for a*2893 reasonable length of time to prospective purchasers, but not to extend beyond the 31st of December, 1914. In case of sale, the president is authorized and directed to make conveyance of the property to the purchaser therefor; and a vote being taken thereon, the majority of the stock represented voted against its adoption, and the same was declared lost.
In lieu of the resolution above the stockholders directed the president that whenever he had an opportunity to sell the land of the company, to call the board of directors together, and submit the same for their approval. On motion of J. L. Caldwell, it was unanimously resolved that the officers of the company be, and they are hereby authorized to purchase the Lee Ellis lands on Skillett Fork of Gilbert Creek, containing thirteen or fourteen hundred acres, now owned by Leon Wiles, Z. T. Vinson and others, provided the same can be obtained and paid for by issuing the capital stock of this company at the rate of one share for each two acres of land conveyed.
At a meeting of the board of directors of the petitioner held on the 12th day of May, 1914, the following correct minute was made:
C. W. Campbell laid before the board the*2894 proposed contract of option with B. Bush, offering to sell the lands of this company at $32 net to the company.
On motion made that the same be authorized and executed on behalf of the company, and a vote being taken, the motion was lost.
At a meeting of the stockholders of the petitioner held on the 15th day of February, 1915, the following resolution was adopted:
RESOLVED that C. W. Campbell, President of this company be, and he is hereby authorized and directed to execute, in the corporate name of the company, an agreement of option upon the lands of this company, which said agreement of option shall be in the form and effect as follows:
"G. R. BUSKIRK AND L. R. REESE:
The GILBERT CREEK LAND COMPANY, a corporation, and the CANEBRAKE LAND COMPANY, a corporation, hereby grant you the right, for a period of sixty (60) days, to buy or sell all of their lands on Gilbert Creek, Browning Fork of Horsepen, Canebrake, Ned's Branch and Little Cub Fork of Huff's Creek, in Mingo and Wyoming County, West Virginia, at the price of Thirty-five ($35.00) Dollars, net, per acre, for fee simple and mineral fee alike, on the terms of one-fourth cash on delivery of general warranty deeds, *2895 and the balance in twelve, twenty-four and thirty months, evidenced by notes bearing six per cent interest and secured by deed of trust on the property. This option shall not become exclusive till you notify us that your proposed purchaser, *926 or his representative, is ready to go upon the land and examine it; thereupon, the option shall become exclusive while the examination proceeds, within the limit aforesaid, and for fifteen (15) days thereafter, in which to make report and for the purchaser to determine whether or not he desires to buy. You or your purchaser may elect to purchase all the lands aforesaid above Gilbert Creek, or you may elect to buy all the lands below Gilbert Creek. In other words, you can buy all or either part, taking Gilbert Creek as the dividing line. If you do not purchase or sell the property within the time aforesaid, and if the companies have not made a sale themselves, then this option may be renewed, upon all its terms and conditions, for another period of sixty (60) days, provided you pay the Gilbert Creek Land Company seven hundred and fifty ($750.00) Dollars and the Canebrake Land Company five hundred ($500.00) Dollars, to be forfeited*2896 if the property be not taken or credited on the purchase price if the property be taken. If the property be sold by written and binding contracts, then a reasonable time will be given the purchaser to examine the title and to pass deeds, but the purchaser must pay at least five thousand ($5,000.00) dollars down on signing the contract and the balance of cash payment upon the delivery of the deeds.
Late in the year 1919 or in the early part of 1920, the petitioner gave an option to one W. P. Tams, Jr., agent for the Guyan Collieries Corporation, to purchase the upper and lower tracts hereinabove mentioned at $50 per acre. The option expired on March 15, 1920. On March 10, 1920, Tams exercised his option to purchase the lower tract and entered into a written contract therefor, and at the same time secured an extension of the option as to the upper tract.
On June 12, 1920, Tams, as party of the one part, and J. L. Caldwell and C. W. Campbell, parties of the other part, entered into the following written agreement, relative to the upper tract:
1. W. P. Tams, Jr., has given C. W. Campbell notice of his acceptance and agreement to purchase the remaining lands of the Gilbert Creek*2897 Land Company in accordance with the terms of the option.
2. Caldwell and Campbell, being stockholders in the Bilbert Creek Land Company are entitled to share in the proceeds of said sale to the extent of their rights; but said Tams desires that they shall share in the purchase of said land to the extent of their interest in the proceeds, but not exceeding one-half interest in the land. They therefore agree with said Tams to join him or his assigns in the purchase of said lands to the extent of their interest in the proceeds thereof, but such interest shall not exceed 50% of the land. If their shares do not equal one-half of the land, then any other stockholder may come in on the same terms and take the remaining of the one-half.
3. Said land shall be conveyed jointly to the corporation formed by said Tams and to the said Caldwell and Campbell to the extent of their undivided interests.
4. Ten Thousand ($10,000) Dollars has been paid by said Tams on said land, and when the survey shall be completed Tams shall furnish enough additional money to finish the cash payment not including the joint interests of Caldwell and Campbell.
On December 3, 1920, pursuant to the agreement*2898 of March 10, 1920, the petitioner conveyed the lower tract to the Guyan Collieries Corporation for a consideration of $50 per acre.
*927 At the time of the sale of the lower tract the survey of the upper tract had not been completed. The acreage therein was unknown and the title thereto had not been approved by the Guyan Collieries Corporation's attorney. The survey was completed during the latter part of January, 1921. The Guyan Collieries Corporation, after inspecting the survey, rejected and refused to buy 514.71 acres of the tract.
On February 16, 1921, deeds were prepared conveying 4,306.59 acres of the upper tract to the Guyan Collieries Corporation, and to C. W. Campbell and J. L. Caldwell, as tenants in common, in the proportions of 54.1 per cent to the Guyan Collieries Corporation, 22.3 per cent to Campbell, and 23.6 per cent to Caldwell. Immediately thereafter said deeds were delivered and the petitioner received in exchange a certain amount of cash, purchase money notes executed by the Guyan Collieries Corporation, and the surrender of capital stock by Caldwell and Campbell. The notes executed by the Guyan Collieries Corporation were dated back to December 31, 1920, and*2899 they bore interest from that date. The 4,306.59 acres conveyed to the Guyan Collieries Corporation, C. W. Campbell, and J. L. Caldwell by the deed of February 16, 1921, consisted of the following land:
4,001.97 acres acquired prior to March 1, 1913.
304.62 acres purchased after March 1, 1913, for $15,250.
The respondent, upon audit of the petitioner's income and profits-tax return for 1920, determined that the sale of both the upper and lower tracts was made in 1920, and that the fair market value of said land was $30 per acre on March 1, 1913. The respondent also computed the petitioner's profits taxes under section 302 of the Revenue Act of 1918 and determined that there is a deficiency in the amount of $14,769.30.
OPINION.
MARQUETTE: The petitioner, between March 2, 1906, and March 1, 1913, acquired from C. W. Campbell and his associates, a number of tracts of land containing a total of 6,364.48 acres, for which it issued its capital stock at the rate of one share of the par value of $100 for each two acres of land. The petitioner contends that the several tracts so acquired had at the dates of acquisition fair market values ranging from $36.25 to $46.25 per acre, *2900 or a total value of $277,321.51, and that it is entitled to include that value in its invested capital. The respondent, however, takes the position that Campbell and his associates were not acting for themselves in purchasing the land, but were in fact agents for the petitioner, and that the petitioner is, therefore, not entitled to include in invested *928 capital on account of these lands more than the amount Campbell and his associates paid for them, which he insists is an undetermined amount based on prices of from $7.20 $20to per acre.
In support of their respective contentions as to whether Campbell and his associates were acting for themselves or as agents of the petitioner in purchasing the land under consideration, the petitioner and the respondent have cited numerous court decisions. However, we consider a discussion of these decisions unnecessary. We are unable to perceive, in the light of the evidence presented, any merit in the contention that Campbell and his associates were acting as agents of the petitioner. They purchased the lands with their own funds; took the titles thereto in their own name; paid the taxes thereon; cleared up the titles, and subsequently*2901 transferred them to the petitioner in exchange for its capital stock. It is true that as to come of the land purchased subsequent to 1906 they agreed among themselves that they would subsequently convey it to the petitioner. The petitioner was not, however, a party to this agreement. The petitioner at no time had any assets other than the land conveyed to it; it had no contract or agreement with Campbell and his associates whereby it could have forced conveyance, and there is no evidence to indicate that the petitioner ever had any interest in the land in question, either legal or equitable, until Campbell and the other men voluntarily conveyed it. Campbell and his associates testified at the hearing that they purchased the land for themselves and not as agents for any corporation formed or to be formed, and their testimony is supported and substantiated by other evidence. We are, therefore, of opinion that these men were acting for themselves; that they owned the land until they transferred it to the petitioner, and we will, therefore, proceed to ascertain the value of the lands at the dates of transfer.
The evidence of record shows that the land that we are considering was, *2902 prior to 1902, composed of numerous small parcels. It was well timbered and was underlaid with seams of coal. However, as long as it continued to be divided into small tracts it was not particularly valuable either as a timber or a coal proposition and, furthermore, the titles appear to have been clouded. Campbell, who had dealt extensively in land in this vicinity, both for himself and as agent for other parties, and who was familiar with this particular land and with the titles, conceived the idea of buying these numerous small tracts and consolidating them into larger tracts, on the theory that after they had been consolidated and the titles cleared the value of the consolidated tracts would be greater than the aggregate value of the small tracts. This he and his associates proceeded to do. The petitioner has introduced a number of witnesses who were familiar with this land and with other land and *929 land values in the vicinity. They testified that the value of the several tracts transferred to the petitioner was from $30 to $60 per acre at the date of transfer. The testimony of Campbell, who was perhaps more familiar with the land than any of the other men associated*2903 with him and who, as has been stated, conceived the idea of buying and consolidating the numerous small tracts and who has had many years experience in buying and selling coal and timber land in West Virginia, testified that the land conveyed between March 3, 1906, and February 2, 1909, was of the value of from $30 to $35 per acre, and that the tract of 550 acres conveyed to the petitioner on July 22, 1912, was of the value of from $40 to $50 per acre. We think that, in view of Campbell's experience and his intimate knowledge of the petitioner's land and of other land and land values in the vicinity, his testimony is entitled to greater weight than that of the other witnesses, and that the values testified to by him are reasonable. We hold that the land conveyed to the petitioner between March 2, 1906, and February 2, 1909, inclusive, was of the fair market value of $32.50 per acre, and that the 550 acres conveyed on July 22, 1912, was of the value of $42.50 per acre. The petitioner is, therefore, entitled to include in its invested capital on account of these lands the amount of $212,345.60. The evidence also shows that the petitioner's stockholders paid to it by way of assessments*2904 the amount of $9,301.99 and it is also entitled to include that amount in its invested capital.
We are also of opinion that the land that the petitioner owned on March 1, 1913, and which it subsequently sold as set forth in the findings of fact, had a fair market value of $42.50 per acre on March 1, 1913. As to the March 1, 1913, value the petitioner introduced a number of witnesses. The values to which they testified run from $40 to $75 per acre. However, we think for the reasons above stated that the testimony of Campbell is entitled to greater weight than the testimony of the other witnesses. He stated that he really valued the land at $50 per acre but to be conservative put it at $40 to $45 per acre. The respondent, however, urges that the fair market value of this land on March 1, 1913, was not more than $30 per acre and he stresses the fact that on August 31, 1912, the petitioner's stockholders adopted a resolution authorizing the sale of the land at $30 per acre on or before January 1, 1913. We attach no particular weight to this action of the stockholders. The evidence shows that at the time certain stockholders desired, because of their private financial necessity, *2905 to make an immediate sale of the petitioner's land at a sacrifice in order to secure money for themselves, and that they secured passage of the resolution. No serious attempt was made, however, to carry it into effect. We do not consider that this action of the stockholders should, under the circumstances, *930 be taken as indicating the actual value of the land at that time. The profit from the sale should be computed on the basis of a March, 1, 1913, value of $42.50 per acre for that part of the land that the petitioner owned on that date.
The only other question is whether the sale of the upper tract was made in 1920 or in 1921. The respondent contends that it was made in 1920 and that the profit from the sale, if any, should be reported as income for that year. The petitioner, on the other hand, contends that the sale was not made until 1921. We are of opinion that the petitioner's contention as to this issue must be sustained. Assuming, for the purpose of this opinion only, that in 1920 Tams, as agent for the Guyan Collieries Corporation, entered into a valid and enforceable contract with the petitioner to purchase the upper tract, which the record does not show, *2906 the sale nevertheless did not take place until 1921. In the case of , the facts were that the taxpayer, in 1916, granted an option to purchase its property and in that year received notice that the option would be exercised if the purchaser approved the title. In 1916 there was no delivery or tender of the deed, nor delivery of possession of the property. Before the close of 1916 the purchaser was able, ready, and willing to perform the contract, but had made no tender of the purchase price. In 1917 payment was made and the deed delivered. The taxpayer kept its accounts and made its returns upon the accrual basis. This Board, in holding that the title passed in 1917; that the purchase price accrued in 1917, and that any gain from the sale should be reported as 1917 income, said:
We do not question that equitable title passed to the purchaser at the time the option was exercised and a contract to sell came into effect, so that any loss or damage to the property would have been the loss or damage of the purchaser. We do not understand, however, that because equitable title may have vested, the vendor then has a legal right*2907 to recover the purchase price, which is the principal question here involved since the books of the petitioner were kept upon an accrual basis.
Ordinarily one who has entered into a contract for the sale of property, whether real or personal, has no right to recover the purchase price until the delivery of the property sold. In the case of real property a right to recover by way of an action for specific performance may exist when a proper tender has been made. Here there was no delivery of the property to the purchaser either by giving it possession of the property, by delivery of the deed, or otherwise, until January 5, 1917, and no tender of delivery, and it was not until 1917 that any right to demand or receive payment of the purchase price arose.
See also, ; .
The evidence herein shows that the conveyance of the upper tract was not intended to be made until the survey had been completed and *931 accepted by the purchaser. The survey was not completed until 1921 and the conveyance was made and the purchase price paid in that year. We are therefore of*2908 opinion that the sale occurred in 1921, not in 1920 and that the profit, if any, arising from the sale of the upper tract was not income to the petitioner in 1920.
Judgment will be entered under Rule 50.