Opinion ID: 1483983
Heading Depth: 1
Heading Rank: 2

Heading: Sale of the Agni Motor Fuel Company Stock.

Text: The taxpayer owned all the shares of stock  500  of the Agni Motor Fuel Company. Late in September, 1929, its president, and one, Beim, the president of the Barber Company, began to bargain for the sale of these shares, and the executive committee of the taxpayer's board of directors authorized its officers to sell them. On the thirtieth the Agni directors declared as a dividend all the surplus and undivided profits of that company, and on the first of October, the Barber Company, and the Globe Oil Refining Company, took over the operating charge of the Agni Company, though the personnel did not change. The price was fixed on October 18th by telephone, and by a letter written by Beim, who stated that he was setting up the books of his company in accordance with certain schedules, which he included; and that he would make an initial down payment of $150,000 if desired. Since the contract included the real estate on which the Agni Company did business, a survey was necessary to divide it off from real property which the petitioner was to retain. On December 6th, $10,000 more was added to the purchase price to include added real estate; and in the letter in which that was agreed to, Beim stated that the buyer's attorney would be back in ten days, and that they would then close the deal, if you will forward us a conveyance for the property or possibly that can be included in the contract, in other words, we are all prepared to complete the deal as soon as the necessary papers are forwarded. The taxpayer did forward a contract on the 9th, which Beim acknowledged on the 16th, saying that with a few minor changes it would be satisfactory; but that it would save time if the two attorneys would confer in Chicago. They arranged to close the deal on December 30th, but owing to a death in Beim's family, this was postponed until January 2nd; and on January 6th the final redraft was submitted by the taxpayer's attorney, Huff, to the attorney for the buyers, Hubachek. The formal contract was signed on the 15th, and the transaction then went through. The taxpayer treated it throughout as having been concluded in 1929  both on its books and in its tax returns. The Commissioner found that it had been closed in 1929 and that the profit must go into the income of that year; so also the Tax Court found. The question is whether that should be the year, or the year 1930. There can be no doubt that the parties supposed that they had concluded a definite bargain in 1929 and acted upon that assumption; but it does not follow that in fact they had done so. Parties must come to an agreement as to all the details, or at least as to all except those without the settlement of which the bargain would nevertheless go through. Although they suppose that they have agreed, if in fact they have not, their supposition will not serve, and they are not bound. In the case at bar the final details were never finally agreed upon in December. For example, on January 6, Huff wrote to Watkins (the taxpayer's accountant) inclosing a copy of what he called the draft of contract    again modified to meet the suggestions of Hubachek when he was last in the office on Saturday, 4th inst. The method of handling the transaction was there stated in detail as agreed upon at some undated conference. Huff sent a copy of this letter to Hubachek, saying that modifications have been made to meet the suggestions contained in your memoranda. Whether that referred to Hubachek's undated memorandum (Ex. 84), does not appear; but plainly some points were still unsettled, which the parties wished to be settled. Hubachek answered Huff on the 8th, saying that he wanted to examine the Warranty Deed and the conveyance before recording. It is true that the record does not disclose how important these details were, and perhaps, if the Tax Court had made a finding, we should have had to accept it even without evidence. But that court did not do so; it did indeed recite the evidence in detail, but we can discover nothing which can be called a finding except that the seller's directors authorized the sale for book value, that the buyer confirmed in writing and took operating charge and that the exact price was finally agreed upon  all in 1929. This is entirely consistent with the power of either buyer or seller to withdraw, as on the face of the record either could have done. The authorities do not countenance the notion that one may accrue a debt which still remains uncertain in obligation. Certainly we decided nothing of the kind in Commissioner v. Union Pacific R. Co., 86 F.2d 637, and the Supreme Court went much further in Lucas v. North Texas Co., 281 U.S. 11, 50 S.Ct. 184, 74 L.Ed. 668, where indeed every detail had been agreed upon in the earlier year. If the ruling in that case is still to be followed, it would not have been enough, even had all the terms of the contract at bar been finally settled in 1929, for possession, right to possession and title were all to depend upon the payment of the first installment. Operating charge was not possession; it meant no more than that the transaction, if finally consummated, should relate back to October 1st. Possession changed when the new personnel was installed in 1930; it was in that year in which the profit should have been charged to income.