Opinion ID: 1479374
Heading Depth: 1
Heading Rank: 1

Heading: Fact Situation.

Text: The facts involved in the above contentions are as follows: The Hugh Stephens Printing & Stationery Company was a Missouri corporation of which petitioner Otto C. Botz was president. Late in 1921, a merger of that company with others was contemplated whereby the entire assets of all were to be transferred to a new Missouri corporation, the Botz Printing & Stationery Company. To induce additional subscriptions to the stock of the new company, the Stephens Company made a written offer or statement that such stock would be sold to employees on certain terms, one of which was as follows: It is further agreed, that in case of discharge or voluntary severance of connection by an employee-stockholder with the new corporation, that all stock or paid-up portion of stock, will be purchased back by The Hugh Stephens Printing & Stationery Company at its face value, plus interest at the rate of 7% for all the time between dividend dates, at the option of the employee, provided 30 days' notice of such desire is given, and it is agreed that money be paid back within 30 days of such time in cash. The new company was incorporated January 3, 1922. Thereafter at various times, the petitioners and others bought stock therein under the terms of the above offer or statement. The main business of the new company was doing printing for and furnishing stationery to the State offices. A change in the politics of the State officials resulted in surrender of the contracts for this State business. As a consequence, the company, on Aug. 1, 1933, sold its physical assets to the Midland Printing Company for $300,000, payable $75,000 cash and $225,000 in bonds of the purchaser. The assets not so sold consisted of accounts and notes receivable, a small amount of office furniture and the good will  these retained assets had little or no market value after the sale. On or about the above sale date, these petitioners and others gave notice to redeem the above purchased stock in accordance with the above offer or statement. The Botz Company accepted these notices and proceeded to make payments thereon from the assets as and when realized. These payments extended through 1933 to 1936. [1] The shares thus involved were 3,664 out of a total issue of 4,516, leaving 852 shares (owned by four of petitioners) not thus disposed of and outstanding. The company carried on no business after the sale. Its activities seem thereafter to have been confined to making some small collections on accounts receivable and in liquidation of its assets and making payment therefrom for these 3,664 shares of stock. There is a balance sheet, prepared from the books of the company by a revenue agent, for the year ending December 31, 1933, as follows: Assets Liabilities Cash .................... $ 2,381.31 Notes payable .......... $ 12,500.00 Notes receivable ........ 9,501.13 Accounts payable ....... 1,819.35 Accounts Receivable ..... 37,955.56 Vouchers payable ....... 2,915.61 Bonds ................... 114,000.00 Capital and surplus .... 146,722.42 Trust fund .............. 119.38 ____________ ___________ Total ............... $ 163,957.38 Total .............. $163,957.38 Also, there is evidence that there was a book value even at the end of 1936. However, the evidence is convincing that, except for a very small value in receivables and furniture, the sole value of the assets was in the above purchase price paid by the Midland Printing Company. In January, 1936, notice of deficiency assessment for these taxes was given. The taxes were for gains realized by the above sale of physical assets to the Midland Printing Company.