*883 1. The net losses of affiliated corporations under the Revenue Acts of 1921, 1924, and 1926 may not be used as a consolidated net loss of the affiliated group to be carried forward as a unit and applied against the consolidated group net income of the succeeding year.
2. Right to make consolidated return by parent and a subsidiary corporation existed where more than 95 percent of the voting stock of the subsidiary corporation was owned by the parent association except for an agreement for sale of stock to an employee of the subsidiary corporation, which provided only conditional payment. The stock in question was to be paid for only out of dividends to be declared and paid by the subsidiary and none were ever paid and in 1926, when the employee ceased his employment, the sale agreement was canceled and all rights of the employee to purchase such stock ceased.
*365 These proceedings, consolidated for hearing, involve deficiencies in income tax determined by respondent as follows:
| Petitioner | Docket No. | Calendar year | Deficiency |
| Edward Hines Lumber Co | 52270 | 1922 | $311.37 |
| Do | do | 1923 | 125,250.64 |
| Trustees of Lumber Investment | |||
| Association | 52274 | 1924 | 38,132.72 |
| Do | do | 1925 | 163,675.48 |
| Do | do | 1926 | 154,301.38 |
| Do | do | 1927 | 50,567.87 |
*884 The original petitions involved about 153 issues. Approximately 150 of these have been settled by the parties and the ultimate result of their agreement incorporated in a stipulation in which it is stated that, subject to the Board's decision on the three remaining issues, the deficiencies are as follows:
| Petitioner | Docket No. | Calendar year | Deficiency |
| Edward Hines Lumber Co. | 52270 | 1923 | $172,420.46 |
| Trustees of Lumber Investment | |||
| Association | 52274 | 1924 | 61,076.43 |
| Do | do | 1925 | 79,929.18 |
| Do | do | 1926 | 107,984.22 |
| Do | do | 1927 | 34,032.67 |
Due claim has been made by respondent for any increased deficiencies pertaining to the years 1923 and 1924.
As a result of the stipulation, petitioners have filed amended petitions, assigning as errors only those issues upon which the parties could not agree. The only error assigned in the amended petition in Docket No. 52270 is follows:
The respondent erred in not allowing the total consolidated net loss of the Edward Hines Lumber Co. and affiliated organizations for the years 1921 and 1922 as a deduction from the consolidated net income of the Edward Hines Lumber Co. and affiliated organizations for the year*885 1923.
*366 The errors assigned in the amended petition in Docket No. 52274 are as follows:
(a) The respondent erred in excluding the Edward Hines Hardwood and Hemlock Company [formerly Park Falls Lumber Co.] and the Edward Hines Farm Land Company from affiliation with the Trustees of Lumber Investment Association for the years 1924, 1925 and the seven months of the year 1926 ending July 31, and, consequently, excluding the net loss of the said companies for the said years 1924, 1925 and the seven months of the year 1926 ending July 31 from the consolidated net income of the Trustees of Lumber Investment Association and affiliated organizations for the years 1924, 1925 and 1926.
(b) The respondent erred in not allowing the total consolidated net loss of the Trustees of Lumber Investment Association and affiliated organizations, including the Edward Hines Hardwood and Hemlock Company and the Edward Hines Farm Land Company, for the year 1925 as a deduction from the consolidated net income of the Trustees of Lumber Investment Association and affiliated organizations for the years 1926 and 1927.
The facts in these proceedings are embodied in a lengthy stipulation which*886 is a part of the record of the case and the facts so stipulated are adopted on their entirety as our findings of fact in these proceedings. Only those facts which are deemed necessary to a full understanding of the issues are stated below.
Deductibility of Consolidated Net Losses in Determining Consolidated Net Income.
The Edward Hines Lumber Co. was incorporated in Illinois on March 17, 1892, for a term of five years; on April 9, 1897, for five years; and again on May 9, 1902, for 25 years. The capital stock of the first corporation was 2,000 shares of common stock having a par value of $200,000. The capital stock of each of the last two corporations was 3,000 shares of common stock having a par value of $300,000.
At a meeting of all the stockholders of the Edward Hines Lumber Co. on May 8, 1902, it was resolved that Edward Hines, L. L. Barth, and C. F. Wiehe be appointed a committee to purchase and hold in trust for the stockholders (1) the entire capital stock of the Lumbermen's Mill Co. and (2) the entire capital stock of such corporations as deemed advisable, and to organize and incorporate such manufacturing and other companies in such states as the committee should*887 determine.
Between 1902 and January 1, 1918, the stockholders' committee had acquired considerable property, consisting of (1) stocks in various corporations, (2) lands, timber, and timber rights, (3) bank deposits, (4) promissory notes, (5) accounts receivable, and (6) contracts. On January 1, 1918, a five-party "Settlement Agreement" was entered into between the Edward Hines Lumber Co. (first party), Edward Hines Yellow Pine Co. (second party), Champion *367 Lumber Co. (third party), Hines, Barth, and Wiehe (fourth parties), and the stockholders of Edward Hines Lumber Co. (fifth parties). The capital stock of the second and third parties had been acquired and at that time was owned by the fourth parties as trustees for the fifth parties. The substance of the agreement was that the fourth parties were to take over all the assets of the second and third parties; that the third party was to be dissolved; that the fourth parties were to create two new trusts, called "Trustees of Lumber Investment Association" (one of the petitioners herein) and "Edward Hines Yellow Pine Trustees"; that the beneficiaries of the two new trusts were to be the stockholders of the Edward Hines*888 Lumber Co.; that the interests of the beneficiaries in the two new trusts were to be the same as their interests in the Edward Hines Lumber Co.; that the trustees of both new trusts were to be Hines, Barth, and Wiehe; that the fourth parties were to transfer a part of the properties and assets owned by them to the Trustees of Lumber Investment Association, sometimes hereafter referred to as Trustees of L. I. A., and the remainder of the properties and assets to the Edward Hines Yellow Pine Trustees; and that all transfers were to be made as of January 1, 1918. The agreement was executed substantially in accordance with its terms.
The Trustees of Lumber Investment Association and the Edward Hines Yellow Pine Trustees filed their income tax returns for the years 1918 to 1927, inclusive, on the basis of being associations taxable as corporations. This basis has been accepted by respondent.
For the year 1921 the Edward Hines Lumber Co. was affiliated within the meaning of section 240 of the Revenue Act of 1921 with the following organizations:
Edward Hines Yellow Pine Trustees
Trustees of Lumber Investment Association
Edward Hines Farm Land Co.
Park Falls Lumber Co. (name*889 later changed to Edward Hines Hardwood & Hemlock Co.)
St. Croix Lumber & Manufacturing Co.
Grand View Mercantile Co.
Superior & Southeastern Railway Co.
Maywood Lumber & Supplies Co.
Mears-Slayton Building Material Co.
Kawishiwi Falls Power Co.
White River Lumber Co.
Edward Hines Yellow Pine Co.
For the year 1922 the Edward Hines Lumber Co. was affiliated within the meaning of section 240 of the Revenue Act of 1921 with the same organizations as in 1921, except the White River Lumber Co., and in addition thereto it was affiliated with the following organizations:
American Extraction Co.
Timber Investment Co.
West Range Iron Co.
*368 For the year 1923 the Edward Hines Lumber Co. was affiliated within the meaning of section 240 of the Revenue Act of 1921 with the same organizations as in 1922, and in addition thereto it was affiliated with the Fairmont & Monongahela Coal Co.
Commencing in 1921, the Edward Hines Lumber Co. declared stock dividends payable in preferred stock, the total authorized issue being $3,000,000 (30,000 shares) which was ten times the amount of the common stock. Each share was entitled to one vote. Not any of this*890 stock was sold by the company to the public, but sales and gifts were made by various stockholders to the public. As a result of these sales and gifts the Edward Hines Lumber Co. has not been affiliated with either of the two trusts or their affiliates subsequent to December 31, 1923.
For the calendar year 1924 a consolidated income tax return was filed, in which organizations were reported as affiliated under section 240 of the Revenue Act of 1924, as follows:
1. Edward Hines Lumber Co. (parent company).
2. Edward Hines Yellow Pine Trustees.
3. Edward Hines Yellow Pine Co.
4. Trustees of Lumber Investment Association.
5. Edward Hines Farm Land Co.
6. Edward Hines Hardwood & Hemlock Co.
7. St. Croix Lumber & Manufacturing Co.
8. Grand View Mercantile Co.
9. Superior & Southeastern Railway Co.
10. Maywood Lumber & Supplies Co.
11. Mears-Slayton Building Material Co.
12. Independence Park Lumber Co.
13. Fairmont & Monongahela Coal Co.
14. West Range Iron Co.
15. Timber Investment Co.
16. Kawishiwi Falls Power Co.
17. American Extraction Co.
The respondent determined that all of the above organizations, except those*891 numbered 1, 5, 6, and 13, were affiliated and entitled to file a consolidated return for the calendar year 1924.
For the calendar years 1925, 1926, and 1927, the Edward Hines Lumber Co. filed separate income tax returns for itself alone, which returns have been accepted by respondent.
For the calendar years 1925 and 1926 consolidated income tax returns were filed, in which organizations were reported as affiliated under section 240 of the Revenue Act of 1926, as follows:
1. Trustees of Lumber Investment Association (parent organization).
2. Edward Hines Yellow Pine Trustees.
3. Edward Hines Yellow Pine Co.
4. Edward Hines Farm Land Co.
5. Edward Hines Hardwood & Hemlock Co.
*369 6. St. Croix Lumber & Manufacturing Co.
7. Superior & Southeastern Railway Co.
8. Maywood Lumber & Supplies Co.
9. Mears-Slayton Building Material Co.
10. Independence Park Lumber Co.
11. Fairmont & Monongahela Coal Co.
12. West Range Iron Co.
13. Timber Investment Co.
14. American Extraction Co.
The respondent determined that all of the above organizations, except those numbered 4, 5, and 11, and including also the Kawishiwi Falls Power*892 Co., were affiliated and entitled to file consolidated returns for 1925 and 1926. For 1926, however, respondent determined that companies numbered 4 and 5 should be excluded from the affiliation only for the first seven months of 1926 and included in the affiliation for the last five months.
For the calendar year 1927 a consolidated income tax return was filed, in which organizations were reported as affiliated under section 240 of the Revenue Act of 1926, as follows:
1. Trustees of Lumber Investment Association (parent organization)
2. North Side Lumber & Timber Co.
3. Blackhawk Lumber Co.
4. Edward Hines Hardwood & Hemlock Co.
5. Superior & Southeastern Railway Co.
6. Independence Park Lumber Co.
7. Maywood Lumber & Supplies Co.
8. Mears-Slayton Building Material Co.
9. Edward Hines Farm Land Co.
10. Edward Hines Yellow Pine Trustees
11. Edward Hines Yellow Pine Co.
12. Fairmont & Monongahela Coal Co.
13. West Range Iron Co.
The respondent determined that all of the above organizations, except those numbered 2, 3, and 12, and including also the Timber Investment Co. and American Extraction Co., were affiliated and entitled to*893 file a consolidated return for 1927. The respondent determined, however, that companies numbered 2 and 3 should be included in the affiliation for the period from August 9, 1927, to December 31, 1927.
Hines, Barth, and Wiehe were officers and directors or trustees in practically all of the organizations heretofore mentioned during the period of their existence up to December 31, 1927, except Wiehe, who disposed of his holdings in the Edward Hines Lumber Co. and the two trusts on April 28, 1923. From 1918 to 1927, inclusive, Hines drew an annual salary of $30,000 from the Edward Hines Lumber Co. and $10,000 from each of the two trusts, and Barth drew an annual *370 salary of $18,000 from the Edward Hines Lumber Co. and $3,500 from each of the two trusts. Wiehe's compensation was the same as Barth's from 1918 to May 8, 1923. Neither Hines, Barth, nor Wiehe drew any compensation from any of the other affiliated organizations.
The taxable income (or loss - indicated by minus sign) of the affiliated organizations having either an income or loss for 1921, 1922, and 1923 is as follows:
| Organization | 1921 | 1922 | 1923 |
| Edward Hines Lumber Co | -$1,129,570.58 | -$206,191.88 | $495,901.45 |
| E. H. Yellow Pine Trustees | -155,443.45 | 645,915.31 | 1,220,526.45 |
| Trustees of L.I.A. | 32,466.97 | -85,894.01 | -85,577.55 |
| Edward Hines Farm Land Co | 10,949.85 | -10,826.71 | -34,986.68 |
| Park Falls Lumber Co | -209,364.78 | -684,156.07 | -233,734.94 |
| St. Croix Lbr. & Mfg. Co | -13,564.10 | 63,476.83 | 5,341.75 |
| Grand View Mercantile Co | 822.36 | -431.60 | -2,925.65 |
| S. & S. Railway Co | 2,174.14 | -2,488.77 | 2,940.26 |
| Maywood Lbr. & Supplies Co | 18,671.25 | 14,417.36 | 24,891.60 |
| M-S Building Material Co | -7,353.84 | 19,226.07 | 20,189.67 |
| E. H. Yellow Pine Co | 698,692.47 | ||
| Faitmont & M. Coal Co | (1) | (1) | 1,515.46 |
| Aggregate losses | -1,515,296.75 | -989,989.04 | -357,224.82 |
| Aggregate incomes | 65,084.57 | 743,035.57 | 2,469,999.11 |
| Net income or loss | -1,450,212.18 | -246,953.47 | 2,112,774.29 |
In addition to the above taxable income (or loss) the Trustees of L.I.A. had nontaxable income for 1921, 1922, and 1923 of $79,253.15, $53,758.02, and $64,871.68, respectively.
The respondent determined that the total consolidated net loss of the affiliated organizations for each of the years 1921 and 1922 was not deductible from the total consolidated net income of the affiliated organizations for 1923.
The taxable income (or loss - indicated by minus sign) of the affiliated organizations having either an income or loss and also of two of the corporations which were held not affiliated for the years 1924, 1925, and 1926, is as follows:
| Organization | 1924 | 1925 | 1926 |
| E. H. Yellow Pine Trustees | $509,497.33 | $67,402.89 | $747,975.78 |
| E. H. Yellow Pine Co | 229,232.45 | 725,688.98 | 760,057.15 |
| Trustees of L.I.A. | -357,911.06 | -275,516.50 | -446,222.84 |
| St. Croix Lbr. & Mfg. Co | -272.05 | 21,664.77 | |
| Grand View Mercantile Co | -109.85 | (1) | (1) |
| S. & S. Railway Company | -4,939.02 | -3,689.23 | 3,197.82 |
| Maywood Lbr. & Supplies Co | 26,002.23 | 30,966.26 | 24,445.41 |
| M-S Building Material Co | 70,447.51 | 20,988.01 | 9,943.44 |
| Ind. Park Lumber Co | 16,663.92 | 27,334.65 | 15,293.09 |
| Subtotal | 488,611.46 | 614,839.83 | 1,114,689.85 |
| Two held nonaffiliated: | |||
| Edward Hines Farm Land Co | -23,274.14 | -2,870.56 | -6,618.90 |
| E. H. Hardwood & Hemlock Co | -395,659.30 | -1,346,821.94 | -744,484.20 |
| Grand total | 69,678.02 | -734,852.67 | 363,586.75 |
*371 In addition to the above losses the Trustees of L.I.A. had nontaxable income for 1924, 1925, and 1926 of $97,265.37, $77,218.64, and $28,999.92, respectively.
Clubine Stock in Park Falls Lumber Co. as Affecting Affiliation.
The Edward Hines Hardwood & Hemlock Co. was organized in 1907 under the laws of the State of Wisconsin, under the name of Atwood Lumber & Manufacturing Co., which name was changed to Park Falls Lumber Co. in 1914, and to Edward Hines Hardwood & Hemlock Co. on July 23, 1924. (This corporation will sometimes be referred to as the Park Falls Lumber Co. without any further statement of the fact that its name has twice been changed.) All of its capital stock was acquired by the trustees for the stockholders of the Edward Hines Lumber Co. in 1913. On January 1, 1918, its authorized capital stock was 35,000 shares of the par value of $3,500,000, of which 34,500 shares were issued and outstanding and owned by the Trustees of L.I.A. until January 1, 1920.
On January 1, 1920, a written agreement was executed between the Park Falls Lumber Co., as first party, and Walter B. Clubine, as second party. Under this agreement*896 Clubine, who was a brother-in-law of Hines, was to enter the employ of the first party as general manager for five years at an annual salary of $12,000, and, as a further consideration, the Trustees of L.I.A. agreed to transfer to Clubine as of January 1, 1920, 2,000 shares of the capital stock of the Park Falls Lumber Co. in exchange for Clubine's promissory note of even date for $200,000, payable on or before five years with interest at the rate of 5 percent per annum. The certificate for the 2,000 shares was to be endorsed in blank by Clubine and was to remain in the custody of the Trustees of L.I.A. as collateral security for the payment of the note. All dividends on the stock were to be applied in payment of interest and principal on the note. In case Clubine's employment should terminate for any reason, including death, before five years or before the payment of the note by the application of dividends thereto, then "the party of the second part, or his estate, if he shall have died, shall have the right to elect either (1) To purchase the said stock, or (2) To sell it to the Trustees of the Lumber Investment Association." If the election should be to purchase, the purchase*897 price to Clubine or his estate was to be the unpaid balance of the note; if the election should be to sell, the Trustees of L.I.A. were to pay Clubine or his estate the excess of the book value of the stock over the unpaid balance of the note. If, however, the book value of the stock should be less than the unpaid balance of the note, the note was to be canceled and Clubine or his estate was not to be held for any deficiency.
*372 The material parts of this agreement between Clubine and the Park Falls Lumber Co. were as follows:
1. The party of the second part agrees to and does enter into the employ of the party of the first part, to act as General Manager of its lumber business, and while so employed, agrees to devote all his skill, energy, and time to said business; such employment to continue for five years from this date.
2. The party of the first part agrees to employ the party of the second part as its General Manager for the said term, and because of his special training and equipment for the position and particularly the knowledge of his duties, the said first party agrees to pay to the said second party, a salary at the rate of twelve thousand dollars ($12,000.00) *898 per year, for the five year period, payable each year in equal monthly installments of $1,000.00 upon or as the first day of each month for the salary of the preceding month, the same to cease on the termination of employment as hereinbefore and hereafter set out.
3. As a further consideration of this agreement, and because of the particular qualifications of the party of the second part for the position of General Manager as aforesaid, and as an inducement to the party of the second part to render efficient service and to continue such employment for the full five years, the Trustees of Lumber Investment Association agrees to transfer to the said party of the second part, as of this date, two hundred thousand dollars ($200,000.00) in par value of the capital stock of the Park Falls Lumber Company, in consideration whereof said party of the second part agrees to and does give to said Trustees of Lumber Investment Association his promissory note of even date for the sum of two hundred thousand dollars ($200,000.00) payable on or before five years from date with interest at the rate of five per cent per annum. The certificate or certificates evidencing the said stock shall have*899 written across its or their face the words: "This stock is issued conditional upon and subject to the terms of a contract between the Park Falls Lumber Company and Walter B. Clubine dated January 1, 1920." Said certificate or certificates shall be endorsed in blank by the party of the second part and shall remain in the custody of the Trustees of Lumber Investment Association as collateral security for the note hereinbefore described.
4. All dividends declared on said stock shall be applied so far as necessary, to payment of interest on said note, and the remainder, if any, shall be applied on the principal of the note.
5. In case the employment of the said party of the second part is terminated at any time within said five years from date by his leaving the employ of the party of the first part, or in the event that the party of the second part shall die prior to the termination of this contract, or the payment of said note by the application of dividends thereto, the party of the second part or his estate, if he shall have died, shall have the right to elect either, (1) To purchase the said stock, or, (2) To sell it to the Trustees of the Lumber Investment Association. In*900 either event the value of the interest of the party of the second part in the said stock shall thereupon be immediately settled as of the date of his leaving the employ of the party of the first part, or his death, as the case may be, as follows: The book value of said stock as next previously determined by the said company shall be ascertained. From the total so found shall be deducted the amount due on said note, if any, with interest at five per cent (5%) per annum from the date the amount of the note was last fixed. If the party of the second part, or his estate, as the case may be, elects to purchase the said stock, it or they shall pay to the party of the first part, the sum so found to be still due upon the said note, and shall receive the said stock and the cancelled note. If, however, the party of the second part or his *373 estate, elects to have the Trustees of Lumber Investment Association purchase said stock, the said Trustees will pay to the said party of the second part, or to his said estate, the book value of the stock, less the amount due on the note as so fixed, and become the owners of the said stock; and shall cancel and return to the party of the second*901 part, or to his estate, the said note. In case the book value of the said stock is less than the amount due on said note, the said party of the second part, or his estate, shall not be held to pay any deficiency but in that case said note shall be cancelled, as well as all claims of either party upon the other concerning the said stock.
6. If the said second party at the end of said five year period has not then fully paid for said stock according to the method prescribed in Paragraph 4, the said Trustees of the said Lumber Investment Association agree that if the second party continues in the employ of the first party for a further term of five years, said Trustees will continue the said agreement in all respects for the further period of five years.
7. All payments of interest and principal on said note to be made to the Trustees of Lumber Investment Association.
The Trustees of L.I.A. endorsed the foregoing agreement as follows:
THE TRUSTEES OF LUMBER INVESTMENT ASSOCIATION hereby, in consideration of the agreement by the said Walter B. Clubine, to accept and remain in the employ of the said Park Falls Lumber Company in accordance with the terms of the foregoing agreement, *902 and in consideration of the fact that the said Trustees of Lumber Investment Association are the owners of the capital stock of the said Park Falls Lumber Company, and that this agreement is considered by the said Trustees of Lumber Investment Association to be beneficial to them, agree for the aforesaid consideration to carry out the provisions of the foregoing agreement in relation to the capital stock of the Park Falls Lumber Company. Dated this first day of January 1920.
In accordance with the agreement the Trustees of L.I.A. on January 1, 1920, transferred to Clubine certificate No. 10 for 2,000 shares of the capital stock of the Park Falls Lumber Co. and obtained Clubine's receipt therefor. The certificate had written across it the notation "This stock issued conditional upon and subject to the terms of the contract between the Park Falls Lumber Company and Walter B. Clubine dated January 1, 1920." Clubine later in 1920 endorsed the certificate in blank and delivered it to the Trustees of L.I.A. in accordance with the terms of the agreement of January 1, 1920.
Clubine's note for $200,000, together with notations thereon, is as follows:
$200,000.00
PARK FALLS, WIS.*903 , January 1, 1920.
On or before five (5) years, I promise to pay to the order of Trustees of Lumber Investment Association Two Hundred Thousand and no/100 Dollars, at the Continental and Commercial Bank, for value received, with interest at the rate of five (5) per cent per annum after date. And I have deposited with Trustees of Lumber Investment Association as collateral security for the payment hereof, Certificate No. 10 for 2,000 shares of the capital stock of the Park Falls Lumber Co.
*374 THIS NOTE IS SUBJECT TO THAT CERTAIN CONTRACT EXECUTED UNDER EVEN DATE BETWEEN THE TRUSTEES OF LUMBER INVESTMENT ASSOCIATION AND MYSELF.
[Signed] W. B. CLUBINE.
Amount of note revised by Contract July 17th, 1924. (See Contract.)
W. S. B.Note cancelled August 2nd, 1926, in pursuance of Contracts of January 1st, 1920 and July 17th, 1924.
EDWARD HINES HARDWOOD AND HEMLOCK COMPANY
By: [Signed] EDWARD HINES, President.
TRUSTEES OF LUMBER INVESTMENT ASSOCIATION
By: [Signed] EDWARD HINES, President.
On January 2, 1920, the "Park Falls Lumber Co. Invest." account on the books of Trustees of L.I.A. was credited with $200,000, the credit being described*904 as "W. B. Clubine folio J. 1." The "J. 1" was a cross reference to the journal entry which read in part "a/c Sale 2,000 shares, stock to W. B. Clubine."
The "Walter B. Clubine" account on the books of the trustees of Lumber Investment Association was charged and credited with interest on account of Clubine's $200,000 note as follows:
| Charged | Credited | |
| Interest to December 31, 1920 | $10,000 | |
| Interest to June 30, 1921 | 5,000 | |
| Interest to December 31, 1921 | 5,000 | |
| Interest to June 30, 1922 | 5,000 | |
| Interest to December 31, 1922 | 5,000 | |
| Interest to June 30, 1923 | 5,000 | |
| Interest to December 31, 1923 | 5,000 | |
| Interest to December 31, 1924 | 10,000 | |
| Interest adjustment December 31, 1924 | $10,000 | |
| Interest to December 31, 1925 | 8,000 |
The one credit itme of $10,000 was explained on the books as follows:
The foregoing entry was made necessary by the endorsement of credit on Mr. W. B. Clubine's note of $40,000. Said $40,000 carrying with it 5 years interest at 5% which is necessary to offset the 5 years interest charged on $200,000 to Mr. Clubine.
The charge of $8,000 to December 31, 1925, was for interest for one year on a note balance of $160,000 (as a result*905 of a certain agreement of July 17, 1924, hereinafter referred to) at an annual interest rate of 5 percent.
The Trustees of L.I.A. credited the above interest charges to certain suspense accounts on its books, except the interest to December 31, 1920, of $10,000, which it credited to its profit and loss account. All of the interest charged to Clubine has been included in the gross income of the Trustees of L.I.A. for the respective year in which it accrued. In 1926 Clubine's note was canceled and respondent allowed the Trustees of L.I.A. a loss in that year in the amount of all the interest that had previously been included in its gross income.
*375 On July 17, 1924, the book value of the stock of the Park Falls Lumber Co. was substantially less than its book value on December 31, 1919, but it was still in excess of par.
On July 17, 1924, a second written agreement was executed between the Park Falls Lumber Co. and Clubine, the material part of which is as follows:
1. That the Agreement entered into between the parties hereto January 1st, 1920, is hereby continued for five years from January 1st, 1925, with the following modification, and no other:
Paragraph 5*906 of the said Agreement is modified by giving to the party of the second part, or his estate, if he shall have died, additional elections or options, as follows:
In case the party of the second part becomes incapacitated by accident or sickness, or dies, then the party of the second part, or his estate, as the case may be, may have the additional options of, first, having the Trustees of Lumber Investment Association, their successors or assigns, hold the said stock until such a time as the dividends have paid the purchase price thereof, including both principal and interest; or second, the option to sell the said stock to outside parties, in which case the Trustees agree to transfer the stock upon the payment of the sum due thereon at the time of said transfer, such sum to be fixed in accordance with the provisions of the contract of January 1st, 1920. Nothing herein contained shall be construed to interfere with the rights of the party of the second part or of his estate, as given by any part of the agreement of January 1st, 1920.
The price at which the party of the second part purchased the said stock is hereby revised as of January 1st, 1920, from One Hundred Dollars ($100.00) *907 to Eighty Dollars ($80.00) per share, and interest thereon shall be recomputed from January 1st, 1920, at five per cent, based on the price so revised.
The Trustees of L.I.A. endorsed this agreement in substantially the same language as it had endorsed the January 1, 1920, agreement.
As a result of the second agreement the Trustees of L.I.A. credited their "Notes Receivable" account with $40,000 and endorsed on Clubine's note of $200,000 a credit of $40,000.
During the period between January 1, 1920, and August 2, 1926, no cash payments were made by Clubine or by anyone on his behalf on account of either the principal of the $200,000 note or interest thereon, nor during that period were there any dividends declared on the 2,000 shares of stock, nor were there any credits applied on the note except the $40,000 agreed to on July 17, 1924. On August 2, 1926, the book value of the 2,000 shares was less than the amount due on the note.
In January 1926 Clubine resigned his position with the Park Falls Lumber Co., effective February 1, 1926.
The minutes of a special meeting of the board of directors of the Park Falls Lumber Co. held July 7, 1926, read, in part, as follows:
*908 The President reported that early in the year he had received the resignation of Mr. Walter B. Clubine as manager to take effect February 1st, 1926, and had accepted the same.
*376 On motion duly made, seconded and carried the action of the President in accepting the resignation of Mr. Clubine was ratified, approved and confirmed.
The President was authorized to endorse Mr. Clubine's contract: "Contract canceled as of February 1st, 1926, and stock released", and to sign such endorsement and return copy of contract to Mr. Clubine upon receipt of Mr. Clubine's copy of the contract similarly endorsed, and, at such time as the General Counsel advised, the 2000 shares of stock standing in the name of Mr. Clubine be transferred to the Trustees of Lumber Investment Association, and Mr. Clubine's note canceled and returned, and that in order to do this the President be authorized to report to the Trustees of Lumber Investment Association that Mr. Clubine's employment by this company had ceased and that he had failed to exercise his option to purchase, although a reasonable time had elapsed.
On July 21, 1926, the general counsel for the Trustees of L.I.A. wrote the latter*909 an office memorandum, stating in part that:
If Mr. W. B. Clubine does not take up his outstanding note by August 1, 1926, I would recommend that the note be cancelled and returned to him and the stock transferred from his name to that of the Trustees of Lumber Investment Association.
On August 2, 1926, both stock certificate No. 10 and the $200,000 note referred to above were canceled, and there was issued to the Trustees of L.I.A. certificate No. 16 for 2,000 shares of the capital stock of the Edward Hines Hardwood & Hemlock Co., formerly the Park Falls Lumber Co.
During the period from January 1, 1920, to August 2, 1926, there were three formal stockholders' meetings held by the stockholders of the Park Falls Lumber Co. Clubine voted in person as a stockholder the 2,000 shares represented by certificate No. 10 at two of the meetings and by proxy at the other.
In the affiliated questionnaires that were filed with respondent by the offices of the Edward Hines Lumber Co. for the years 1921, 1923, and 1924, the Trustees of L.I.A. were reported as the owner of only 32,250 of the 34,500 outstanding shares of the capital stock of the Park Falls Lumber Co. The remaining 2,250*910 shares were reported in the 1921 questionnaire as being owned by "minority interests" and in the 1923 and 1924 questionnaires as being owned as follows: Walter B. Clubine, 2,000 shares; Gertrude W. Bennet, 250 shares.
Clubine did not at any time during the year 1920 own property the value of which was as much as $200,000, and this fact was known to the Trustees of L.I.A.
Clubine did not at any time own any stock or beneficial interest in the Edward Hines Lumber Co., Trustees of L.I.A., or Edward Hines Yellow Pine Trustees, or any stock or beneficial interest in any of the organizations held affiliated by respondent during the period from January 1, 1924, to July 31, 1926.
*377 Affiliation of Edward Hines Farm Land Co.
The Edward Hines Farm Land Co. was incorporated in 1914 under the laws of the State of Wisconsin, chiefly for the purpose of acquiring and selling to settlers the land in Wisconsin from which the Park Falls Lumber Co. was cutting timber. Its issued and outstanding capital stock during the period from January 1, 1924, to July 31, 1926, consisted of 3,870 shares (par value $387,000) which during the entire period were owned as follows: Trustees of*911 L.I.A., 1,370 shares; Park Falls Lumber Co., 2,500 shares.
Respondent was authorized and directed by all of the affiliated organizations for the years 1922 and 1923 to assess the total tax against the Edward Hines Lumber Co. Respondent was also authorized and directed by all of the affiliated organizations for the years 1924 to 1927, inclusive, to assess the total tax against the Trustees of L.I.A.
OPINION.
BLACK: The legal principles involved in the one assignment of error in Docket No. 52270 seem to be well settled. It is petitioner's contention, however, that, under section 204(a) and (b) of the Revenue Act of 1921, it is entitled to deduct from the $2,112,774.29 consolidated net income of the affiliated organizations for 1923 the total consolidated net losses of the group as an entity for 1921 and 1922 of $1,450,212.18 and $246,953.47, respectively, after such net losses are reduced to a combined total of $1,564,154.48 by deducting therefrom the nontaxable income of the Trustees of Lumber Investment Association for 1921 and 1922 of $79,253.15 and $53,758.02, respectively, thus leaving a taxable consolidated net income for 1923 of $548,619.81. In support of this contention*912 petitioner argues that, because it and the organizations affiliated with it had agreed in writing among themselves, under section 240(b) of the Revenue Act of 1921, that respondent was authorized and directed to assess the tax accruing from the affiliated group for 1922 and 1923 against petitioner, this fact made petitioner the "taxpayer" as to all the tax due and owing from all the affiliated organizations as the term "taxpayer" is used in section 204(a) and (b); that in any event the several affiliated organizations were in substance and reality but one corporation; and that, therefore, respondent should have looked through the form to the substance, assessed them as one corporation, and carried forward the net losses of 1921 and 1922 as if they were the net losses of only one corporate taxpayer and deducted them from the 1923 consolidated net income. Petitioner in support of its contention cites and relies principally upon United States v. Lehigh Valley Railroad Co.,220 U.S. 257">220 U.S. 257; *378 Southern Pacific Railroad Co. v. Lowe,247 U.S. 330">247 U.S. 330; and *913 Gulf Oil Corporation v. Lewellyn,248 U.S. 71">248 U.S. 71. It should be noted at this point that none of these cases deal with the question we have here and that the right of a corporation to carry forward a net loss from one taxable year and use it as a deduction from net income in the following year is strictly a statutory concept. Its application must be made in the manner intended by Congress as expressed in the language of the statute. Therefore, we do not regard the cases cited by petitioner as authority on the issue which we have here to decide.
Respondent contends that the affiliated group is merely a tax computing unit; that, although the several affiliates may agree among themselves who is to pay the tax, each affiliate remains nevertheless a taxpayer; that section 204, supra, contains no provision for permitting a net loss sustained by one taxpayer to be availed of by another and different taxpayer; and that, therefore, we must determine the statutory net loss of each affiliate separately and allow it as a deduction in either of the two succeeding taxable years only to the extent that the affiliate sustaining the net loss has income from which the net loss*914 may be taken. The respondent's position on this issue is sustained. Woolford Realty Co. v. Rose,286 U.S. 319">286 U.S. 319; Swift & Co. v. United States, 38 Fed.(2d) 365; Kaiwiki Sugar Co. v. Burnet, 63 Fed.(2d) 822; Delaware & Hudson Co.,26 B.T.A. 520">26 B.T.A. 520; affd., 65 Fed.(2d) 292; certiorari denied, 290 U.S. 670">290 U.S. 670; Beneficial Loan Society,26 B.T.A. 858">26 B.T.A. 858; affd., 65 Fed.(2d) 759; certiorari denied, 290 U.S. 677">290 U.S. 677; Seiberling Rubber Co. v. Commissioner, 70 Fed.(2d) 651, affirming a Board memorandum opinion of June 29, 1932; certiorari denied, 293 U.S. 611">293 U.S. 611; Corco Oil Refining Corporation v. Helvering, 72 Fed.(2d) 177; California Wharf & Warehouse Co.,28 B.T.A. 509">28 B.T.A. 509.
Affiliation of Park Falls Lumber Co. and Edward Hines Farm Land Co. with Trustees of L.I.A.
Consideration will now be given to assignment of error (a) raised in the amended petition in Docket No. 52274. This assignment of error raises the question of whether the Park Falls Lumber Co. and Edward Hines Farm Land Co. were*915 affiliated with the Trustees of L.I.A. for the period January 1, 1924, to July 31, 1926. Under section 240(c) of the Revenue Acts of 1924 and 1926, "* * * two or more domestic corporations shall be deemed to be affiliated (1) if one corporation owns at least 95 per centum of the voting stock of the other or others, or (2) if at least 95 per centum of the voting stock of two or more corporations is owned by the same interests." See also section 240(d), Revenue Act of 1926. The instant case turns *379 upon the ownership of the outstanding capital stock of the Park Falls Lumber Co. and Edward Hines Farm Land Co. The respondent determined that the stock of these two corporations was owned as follows:
| Park Falls Lumber Co. | E. H. Farm Land Co. | |||
| Stockholder | Shares | Percent | Shares | Percent |
| Trustees of L.I.A | 32,250 | 93.48 | 1,370 | 35.40 |
| Walter B. Clubine | 2,000 | 5.80 | ||
| Gertrude W. Bennet | 250 | .72 | ||
| Park Falls Lbr. Co | 2,500 | 64.60 | ||
| Total | 34,500 | 100.00 | 3,870 | 100.00 |
On the other hand, petitioner (in Docket No. 52274) contends that the stock of said two corporations was owned as follows:
| Park Falls Lumber Co. | E. H. Farm Land Co. | |||
| Stockholder | Shares | Percent | Shares | Percent |
| Trustees of L.I.A | 34,500 | 100.00 | 1,370 | 35.40 |
| Park Falls Lbr. Co | 2,500 | 64.60 | ||
| Total | 34,500 | 100.00 | 3,870 | 100.00 |
*916 It is clear that, if petitioner's contention that the Trustees of L.I.A. were the owners of the 2,000 shares of the Park Falls Lumber Co. which stood in the name of Clubine is true, then the Trustees of L.I.A. were the owners of more than 95 percent of the stock of the Park Falls Lumber Co., and the two organizations were affiliated during the period in question under section 240(c)(1). And it is likewise true that the Edward Hines Farm Land Co. would be a member of the affiliated group, because in such case more than 95 percent of its stock would be owned by the same interests. Sec. 240(c)(2). See G.C.M. 8982, Cumulative Bulletin X-1, p. 250; Olds & Whipple v. Commissioner, 75 Fed.(2d) 272.
In addition to the facts heretofore set out regarding the ownership of the 2,000 shares determined by respondent to have been owned by Clubine, the parties have stipulated substantially as many facts regarding the ownership of the 250 shares determined by respondent to have been owned by Gertrude W. Bennet. Petitioner contends that the 2,250 shares were owned by it, or, in other words, that it owned 100 percent of the stock of the Park Falls Lumber Co. In our narrative*917 of some of the stipulated facts we have omitted to state any facts relative to said 250 shares, for it is at once apparent *380 that even if petitioner owned those shares, but did not own the said 2,000 shares, it owned only 94.20 percent of the stock of the Park Falls Lumber Co., which is less than the 95 percent required by the statute. On the other hand, if petitioner owned the 2,000 shares, but not the 250 shares, it owned 99.28 percent of the stock, or 4.28 percent more than than is necessary under the statute. Both petitioner and respondent concede in their briefs that a determination of who owned the 250 shares which stood in the name of Gertrude W. Bennet is unimportant to a decision of the question of affiliation. Since it is therefore immaterial, as far as the present affiliation question is concerned, who owned the 250 shares, we will make no further reference to them in this report. The question is thus narrowed to whether the remaining 2,000 shares of the Park Falls Lumber Co. were owned by Clubine, as respondent determined and contends, or by petitioner (Trustees of L.I.A.), as it contends.
In determining this question we of course must look to all the facts*918 in the record. Some of these facts unquestionably support respondent's contention. Other facts however seem to establish that it was never intended that Clubine should be the owner of this stock until it was paid for in the manner agreed upon. The stock, it is true, was placed in his name, but he immediately endorsed the certificate in blank and turned it over to the Trustees of L.I.A., to be kept by them with the agreement entered into and the note for $200,000 which he had executed. If this note for $200,000 had been intended to be unconditionally payable to the Trustees of L.I.A., then clearly it would be proper to hold that the contract was a contract of sale and that title to the 2,000 shares of stock in question passed immediately to Clubine and was merely being held by the Trustees of L.I.A. as collateral security for the payment of Clubine's note. Handy & Harmon v. Burnet,284 U.S. 136">284 U.S. 136. But the contract and note, and the circumstances surrounding their execution, do not seem to indicate that Clubine was unconditionally liable to pay the $200,000 note.
An analysis of the agreements of January 1, 1920, and July 17, 1924, shows that neither party expected*919 the note to be paid except from dividends. The provisions relating to the note are:
[Paragraph 3.] * * * in consideration whereof said party of the second part agrees to and does give to said Trustees of Lumber Investment Association his promissory note of even date for the sum of two hundred thousand dollars ($200,000.00) payable on or before five years from date with interest at the rate of five per cent per annum.
Said certificate or certificates shall be endorsed in blank by the party of the second part and shall remain in the custody of the Trustees of Lumber Investment Association as collateral security for the note hereinbefore described.
[Paragraph 4.] All dividends declared on said stock shall be applied so far as necessary, to payment of interest on said note, and the remainder, if any, shall be applied on the principal of the note.
*381 Paragraph 5 gave Clubine, or his estate, two elections in case Clubine left his employment "prior to the termination of this contract, or the payment of said note by the application of dividends thereto", the two elections being "(1) To purchase the said stock or, (2) To sell it to the Trustees of Lumber Investment*920 Association." Then followed provisions for ascertaining value:
From the total so found shall be deducted the amount due on said note, if any, with interest at five per cent (5%) per annum from the date the amount of the note was last fixed. If the party of the second part, or his estate, as the case may be, elects to purchase the said stock, it or they shall pay to the party of the first part, the sum so found to be still due upon the said note, and shall receive the said stock and the cancelled note. If, however, the party of the second part or his estate, elects to have the Trustees of Lumber Investment Association purchase said stock, the said Trustees will pay to the said party of the second part, or to his said estate, the book value of the stock, less the amount due on the note as so fixed, and become the owners of the said stock; and shall cancel and return to the party of the second part, or to his estate, the said note. In case the book value of the said stock is less than the amount due on said note, the said party of the second part, or his estate, shall not be held to pay any deficiency but in that case said note shall be cancelled, as well as all claims of either*921 party upon the other concerning the said stock.
[Paragraph 6.] If the said second party at the end of said five year period has not then fully paid for said stock according to the method prescried in Paragraph 4 [i.e., dividends], the said Trustees of the said Lumber Investment Association agree that if the second party continues in the employ of the first party for a further term of five years, said Trustees will continue the said agreement in all respects for the further period of five years. [Italics ours.]
It will be noted that paragraph 6 contemplates no payments except from dividends.
[Paragraph 7:] All payments of interest and principal on said note to be made to the Trustees of Lumber Investment Association.
The agreement of July 17, 1924, does not mention the note at all, but gives Clubine, in case of his becoming incapacitated by accident or sickness, or of his death:
The additional options of, first, having the Trustees of Lumber Investment Association, their successors or assigns, hold the said stock until such a time as the dividends have paid the purchase price thereof, including both principal and interest; or, second, the option to sell*922 the said stock to outside parties, in which case the Trustees agree to transfer the stock upon the payment of the sum due thereon at the time of said transfer.
The note itself was dated January 1, 1920, payable on or before five years, with interest at the rate of 5 percent per annum after date, and contains a clause:
This note is subject to that certain contract executed under even date between the Trustees of Lumber Investment Association and myself.
*382 Not a dollar of Clubine's salary from the Park Falls Lumber Co. could be retained to pay on the note. No property which he may have had could have been subjected to the payment of the note. It is true that the facts show that from 1920 to 1926, inclusive, the Trustees of L.I.A. accrued on their books interest on the note at the rate of 5 percent per annum, but no interest was ever in fact collected from Clubine and all of this accrued interest was canceled in 1926, when the contract and note were canceled and turned back to Clubine. No interest on this note was properly accruable on the books of the Trustees of L.I.A., for none was payable except out of dividends of the Park Falls Lumber Co. and no dividends were*923 ever declared and paid.
The facts with reference to this employment contract with Clubine, carrying with it certain rights to become the owner of 2,000 shares of stock in the Park Falls Lumber Co., are very similar to those which were present in Moore v. McGrawl, 63 Fed.(2d) 593. In that case the agreement with an employee recited the sale of stock at par and the giving of a note therefor payable on demand. The court pointed out however, that, while the note expressed an unconditional obligation to pay, nevertheless the real agreement was that the note should be paid out of dividends accruing upon the stock. The contract further provided that it was at the option of the employee whether he would pay for the stock, the option to last so long as he should continue to remain an employee, and the certificate of stock placed in the name of the employee was endorsed and redelivered to the company. On these facts the court held that there was no obligation on the part of the employee to pay for the stock, the agreement was lacking in mutuality, and, consequently, there was no sale or transfer of title to the stock. The court further held that a consolidated return*924 of the parent corporation and its two subsidiary companies was proper.
To the same effect is our decision in Hennepin Holding Co.,23 B.T.A. 119">23 B.T.A. 119. That was a case involving a claim of affiliation under the 1924 Act as here. One of the corporations claiming to be a member of the affiliated group was the Plymouth Clothing Co. One hundred and thirty-four shares of its stock stood in the name of H. L. Tucker, an old employee who did not own any stock in the other corporations involved. Of the stock owned by him, we said:
* * * It is true that this stock stood on the books in the name of Tucker, but it remained in the possession of the corporation, and its issue appears to have been an incident in the carrying out of an arrangement whereby this old employee was to be permitted to acquire a stock interest from future earnings of the corporation which it was anticipated would result from his employment by it and his efforts in its behalf. This anticipation as to earnings did not bear fruit, the corporation producing no profit for distribution, and consequently no equity was acquired by Tucker on this stock and after some years *383 the agreement was canceled*925 and the stock turned back into the treasury of the corporation. * * *
On these facts we held that the affiliation should be allowed. Cf. W. N. Ritter Lumber Co., issue No. 8, 30 B.T.A. 231">30 B.T.A. 231.
The facts in the instant case are distinguishable from those in Handy & Harmon v. Burnet, supra. In that case the parent corporation caused a subsidiary corporation to be organized to take over the work of one of its departments. The stock of the new corporation was issued to the extent of 20 percent to one Hamilton, who became its president. Hamilton owned no stock in the parent corporation. He was without funds to purchase the stock in the new corporation, and one of the shareholders in the parent corporation arranged for him to borrow the necessary money from a bank upon his notes endorsed by the shareholder mentioned. This stockholder then received the stock under an "irrevocable stock power", executed by Hamilton as collateral for the payment of the notes. On these facts the Supreme Court held that, notwithstanding the execution of this irrevocable stock power and the placing of the stock as collateral security for the payment of the notes, Hamilton*926 was still the beneficial owner of the stock, and disallowed affiliation.
As we have already pointed out, Clubine did not borrow the money with which to purchase the 2,000 shares in question. If he had done so and had executed his note for the borrowed money and had used the money for paying for the stock, he undoubtedly would have become the owner of the stock in question, even though he immediately placed it as collateral security for the payment of his note, and the Commissioner's determination of no affiliation would stand. What he did do was to enter into a contract whereby he would become the owner of the stock, if and when sufficient dividends of the Park Falls Lumber Co. were declared and paid, to pay for it. This never happened and he never became the owner of the stock. Cf. Goodhue v. United States,17 Fed.Supp. 86.
In the Goodhue case, Goodhue was an employee of the Chicago Pneumatic Tool Co. In 1924 he entered into a contract with his employer to purchase 1,000 shares of its capital stock at $82.50 per share. Payments for the stock were to be made by crediting Goodhue's account with one-half of any bonuses in excess of his regular salary*927 and by the dividends actually paid by the corporation on a like amount of its outstanding stock. Interest was to be both charged and credited. The stock was not to be delivered until payments therefor "shall be sufficient to pay for the same in full, after making the adjustments above provided for." At the trial the parties agreed that only 900 shares were involved, on which Goodhue had paid $40,240 by November 19, 1928. About that time the corporation had decided to recapitalize and there was offered and accepted by Goodhue *384 a proposition to cancel his contract of 1924 and receive for his rights to purchase the 900 shares $45,327.22 in cash and 2,935 shares of new class B stock of a value of $35 per share, or $102,725. On December 31, 1928, the certificate of incorporation was amended and in 1929 Goodhue received the $45,327.22 in cash and the 2,935 shares of new stock. Goodhue contended that he was not taxable on the 2,935 shares for the reason that he had exchanged stock in a corporation a party to a reorganization for stock in such corporation. The Court of Claims denied this contention upon the ground that Goodhue was never a stockholder in the old corporation.
*928 On this issue we sustain petitioner, and, as we have already pointed out in holding that the Park Falls Lumber Co. was affiliated during the period in question with the Trustees of L.I.A., it necessarily follows that during the same period the Edward Hines Farm Land Co. was also a member of the affiliated group and is entitled to join in the consolidated return.
In arriving at the conclusion which we have reached on this issue. we have not overlooked Gardner-Denver Co.,27 B.T.A. 1171">27 B.T.A. 1171; affd., 75 Fed.(2d) 38, and A. Levy and J. Zentner Co.,31 B.T.A. 386">31 B.T.A. 386, cited and urged by respondent in support of his contention. We think these cases are distinguishable on their facts. Each of these cases involved stock subscription plans which we held under the facts involved contracts of purchase and sale of the stock and not contracts of employment. The situation in the instant case is different in the respect which we have endeavored to point out.
The parties have stipulated as follows:
Should the Board find and determine that the Edward Hines Hardwood and Hemlock Company (name changed in 1924 from Park Falls Lumber Co.), and the Edward*929 Hines Farm Land Company, were affiliated with the Trustees of Lumber Investment Association for the years 1924 and 1925 and the period January 1, 1926 to July 31, 1926, then, and in that event, the Board may and should find that the income of Trustees of Lumber Investment Association for the year 1926 should be increased by $48,000 and the income of said organizations for the years 1921, 1922, 1923 and 1925 should be reduced by $10,000 for 1921, $10,000 for 1922, $10,000 for 1923 and $8,000 for 1925 and the deficiencies stipulated herein, subject to the decisions of the Board on the issues involved in the appeals, redetermined accordingly.
The facts are found by us as above stipulated by the parties and effect will be given thereto in a redetermination under Rule 50.
This leaves us now to consider petitioner's assignment of error (b) in Docket No. 52274. This assignment of error raises the same issue except as to different taxable years as the one assignment of error in Docket No. 52270. We have decided that issue against petitioner and, for the reasons already stated, we hold against petitioner on issue (b), Docket No. 52274.
Reviewed by the Board.
Decision will be*930 entered under Rule 50.