The issue in this ease is one of fact. The special findings set out the material facts in full.
In 1921 the plaintiff and his two brothers were the sole owners, in equal shares, of the stock of the Krause State Savings Bank, which had a capital stock of $250,000, divided into 3,000 shares. The stockholders of the Krause State Savings Bank, consisting of the plaintiff and his two brothers, agreed to consolidate with the Home Bank & Trust Company, and under this agreement the *124stock of the Krause State Savings Bánk was to be exchanged for a like number of shares of the Home Bank & Trust Company, share for share.
At the time the consolidation agreement was entered into, the plaintiff and his two brothers agreed to sell to Peter L. Evans, who was president of the Home Bank & Trust Company, 600 shares of the Home Bank & Trust Company, and also gave an option to Evans to purchase 400 additional shares. It is manifest that this agreement could not take effeet until after the consolidation, and after the stock of the Home Bank & Trust Company had been delivered to the plaintiff and his brothers. The agreement of sale and option clearly stated' “after consolidation.” At about this tinae the plaintiff and his two brothers executed a trust agreement to the Union Trust Company, as trustee, whereby the entire stock of the Krause State Savings Bank was delivered to the trustee to be delivered by it to the Home Bank & Trust Company in exchange for a like number of shares. After the consolidation had been effected, the Home Bank & Trust Company delivered to the trustee 3,000 shares of its stock in exchange for a like number of shares of the stock of the Krause State Savings Bank. In this trust agreement the Krauses -fixed the value of the stock of the Krause State Savings Bank at $83.33% a share, and the trustee was authorized and empowered to sell and deliver to Peter L. Evans from 600 to 1,000 shares at $250 a share, in accordance with the agreement made with Evans, and to deliver to the plaintiff and his two brothers the remaining 2,000 shares. After the 3,000 shares had been delivered to the trustee' by the Home Bank & Trust Company in exchange for all of the stock of the Krause State Savings Bank, -the- trustee sold to Evans 1,000 shares at $250 a share, -and co-temporaneously Evans sold'these shares to the stockholders of the Home Bank & Trust Company and others, at. $250 a share. The fair market value of the stock was established at the time of acquisition by outsiders.
The Commissioner of Internal Revenue found that the plaintiff and- his two brothers had derived a profit, from the sale of the 1,000 shares, of the difference between $83,-333.33% and $250,000, or the sum of $166,-666.66%, and that each of the brothers had made a net gain of $55,520.20, and levied an additional tax, which was duly collected. A refund claim was filed and rejected.
The plaintiff contends that he and his two-brothers exchanged 3,000 shares of stock of the Krause State Savings Bank for 2,000 shares of the stock of the Home Bank & Trust Company and $250,000 in cash, and therefore-there was no taxable gain under section 202 (e) of the Revenue Act of 1921 (42 Stat. 230), which reads as follows:
“Where property is exchanged for other property which has no readily realizable market value, together with money or other property which has a readily realizable market value, then the money or the fair market value of the property having such readily realizable -market value received in exchange shall be applied against and reduce the basis, provided in this section, of the property exchanged, and if in excess of such basis shall be taxable to the extent of the excess; but when property is exchanged for property specified in paragraphs (1), (2), and (3) of subdivision (e) as received in exchange, together with money or other property of a readily realizable market value other than that specified in such paragraphs [the amount of the gain resulting from such exchange ■shall be computed in accordance with subdivisions (a) and (b) of -this -section, but in no such case shall the taxable gain exceed the amount of], the money or the fair market value of such other property received in exchange.”
However, the facts of the case do not bear out the plaintiff's contention. Their agreement to sell the' stock of the Home Bank & Trust Company was to take effeet after the consolidation, and was made, not to the Home Bank & Trust Company, but to a third party. The stock of the Home Bank & Trust Company had a readily realizable market value after the consolidation and was actually sold by Evans to the stockholders of his bank and outsiders for the sum of $250 a share, which was $166.66% in excess of the value of the stock for which it was exchanged. It was not a "gain made in exchange of stock, but a gain made in the sale of the stock of the consolidated banks after the exchange, which resulted in an excess of value and from which a profit was derived which was taxable.
In our opinion, the Commissioner was' correct in making the additional assessment and collecting the tax. The petition is dismissed. It is so ordered.