Court Opinion

ID: 4612452
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:51:10.982013+00
Date Added: 2024-06-11T07:54:26.794986
License: Public Domain

Gladys C. Blum, Petitioner, v. Commissioner of Internal Revenue, RespondentBlum v. CommissionerDocket No. 5791United States Tax Court5 T.C. 303; 1945 U.S. Tax Ct. LEXIS 139; June 21, 1945, Promulgated 1945 U.S. Tax Ct. LEXIS 139">*139 Decision will be entered for the respondent.  The acquisition by a corporation of all of one class of stock which was to be redeemed according to the terms of the stock is within section 115 (i) and (c), Internal Revenue Code, treating the gain to the shareholder as a short term capital gain, regardless of an original contract assumed by the corporation to purchase the stock, where, after assignment of the contract to the corporation, the stockholders adopted a plan of recapitalization under which three classes of stock were issued, one class being issued in exchange for the stock covered by the contract, with the clearly stated provision that it was to be redeemed. Maurice Epstein, Esq., for the petitioner.D. Louis Bergeron, Esq., for the respondent.  Harron, Judge.  HARRON 5 T.C. 303">*304  The respondent determined deficiencies in income tax for the years 1939, 1940, and 1941 in the respective amounts of $ 542.19, $ 1,034.26, and $ 1,674.76.  The only question at issue is whether the gains realized by petitioner from the disposition of shares of corporate stock is taxable under section 115 (c) of the Internal Revenue Code as distributions in partial liquidation or under section 117 as gains from the sale of capital assets.Petitioner filed her returns for the taxable years with the collector for the second district of Texas.Most of the facts have been stipulated.FINDINGS OF FACT.The stipulation of facts filed by the parties is adopted, and incorporated herein by reference.  Only1945 U.S. Tax Ct. LEXIS 139">*141  those facts essential to an understanding of the issue are set forth herein.The petitioner resides in Galveston, Texas.  She is the daughter of Robert I. Cohen, deceased, and Agnes L. Cohen.Foley Brothers Dry Goods Co., a corporation, was organized in 1911, under the laws of Texas, with its place of business in Houston.  On February 20, 1926, there were 6,000 shares of common stock outstanding, which were held by two persons.  Robert I. Cohen owned 2,520 shares, 42 percent; and George S. Cohen owned 3,480 shares, 58 percent.  Robert Cohen's stock cost him $ 70,400.  His wife, Agnes, had an undivided community interest in his stock.Robert Cohen entered into an agreement with his son, George Cohen, on February 20, 1926.  The terms of the agreement are incorporated herein by reference.  The agreement was not made with Foley Brothers Dry Goods Co.  The purpose of the agreement was to guarantee Robert Cohen a fixed income for life out of his interest in his 2,520 shares of common stock. George Cohen, being the majority stockholder of the company, agreed to vote his stock so that the company would pay to Robert Cohen $ 20,000 a year for life and, upon his death, the same amount to his1945 U.S. Tax Ct. LEXIS 139">*142  widow for life.  George guaranteed the annual payments in the event the company failed to make payment.  George Cohen further guaranteed Robert Cohen that there would be paid dividends on the said 2,520 shares of common stock, each year, in the amount of $ 15,120.  That amount represented 6 percent of 5 T.C. 303">*305  $ 252,000, the par value of Robert Cohen's stock. It was agreed that all dividends in excess of 6 percent, payable on Robert Cohen's stock should belong to and be payable to George Cohen.  George Cohen guaranteed to pay his father $ 15,120 per year in the event the company did not earn sufficient to pay that amount on the stock. It was further agreed that George Cohen obligated himself to purchase the said 2,520 shares of stock from the estate of Robert Cohen, upon his death, at par, $ 252,000, payable in equal annual installments of $ 25,000, together with interest at the rate of 6 percent, one-half of the purchase price to be payable to Mrs. Robert Cohen and one-half to be payable to the estate.  It was agreed that, during the life of Robert Cohen, George Cohen should have the right to vote a sufficient amount of the stock of Robert Cohen whenever he desired.Upon the execution1945 U.S. Tax Ct. LEXIS 139">*143  of the above described agreement the certificates of stock held by Robert Cohen were marked "subject to contract February 20, 1926, stock" and thereafter such stock was recognized by the corporation as "subject to contract" stock.Robert Cohen died on October 15, 1934.  Agnes Cohen, his widow, became the owner of 2,520 shares of "subject to contract" stock. She gave 2,016 shares of the stock to petitioner on December 31, 1934, and retained the remaining 504 shares.The stockholders of the company adopted a resolution on February 7, 1935, under which the company accepted the offer of George Cohen to assign to it the contract dated February 20, 1926.  The minutes of that meeting are incorporated herein by reference.  At the meeting one of the resolutions adopted provided that the company would buy the 504 shares of common stock standing in the name of Agnes Cohen and the 2,016 shares standing in the name of the petitioner, at the contract price of $ 100 per share, and that the company would purchase Agnes Cohen's stock prior to December 1936, and petitioner's stock in 8 installments of 252 shares each, annually, during the period commencing January 31, 1937, and ending January 31, 1945 U.S. Tax Ct. LEXIS 139">*144  1944.George Cohen assigned the contract to the company on September 10, 1935.  The company agreed to perform George Cohen's obligations under the contract.On September 10, 1935, the company acquired 304 shares of stock from Agnes Cohen at the price of $ 100 per share.  The certificates acquired were numbered 49 and 67.On December 28, 1935, a special meeting of the stockholders of the company was held, at which time it was unanimously resolved to recapitalize the company and increase the capital stock from $ 600,000 to $ 1,644,000.  As of January 31, 1935, the balance sheet of the company showed the total assets over total liabilities to be $ 2,092,455.62, represented by the 6,000 shares of common stock outstanding and surplus 5 T.C. 303">*306  and undivided profits of $ 1,492,455.62.  The resolution provided that the recapitalization should be represented by the following classes and amounts of stock:(1)2,520 shares of First 6% Preferred Capital Stock, eachshare of the par value of $ 100.00, total issuedamounting to$ 252,000.00(2)3,480 shares of Second 6% Preferred Capital Stock, eachshare of the par value of $ 100.00, total issuedamounting to348,000.00(3)10,440 shares of Common Capital Stock, each share of thepar value of $ 100.00, total issued amounting to1,044,000.00Total New Capitalization$ 1,644,000.001945 U.S. Tax Ct. LEXIS 139">*145  The resolution adopted at the meeting held on December 28, 1935, provided that the new stock should be distributed to the owners of the old capital stock of 6,000 shares "in proportion to their interest therein and in exchange therefor," but the resolution did not provide what stock, or class of stock, was to be issued in exchange for the 3,480 shares of old common stock owned by George Cohen.  Neither was that matter set forth in the affidavit attached to the application for the charter amendment filed with the Secretary of State of Texas.  The resolution stated what the preferences, rights, and limitations of the three classes of new stock would be.  It was provided that the first preferred stock would be entitled to 6 percent cumulative preferential dividends, computed at 6 percent of the par value of the stock, and that the entire 2,520 shares were to be redeemed. It was provided that the second preferred stock would be entitled to dividends at the same rate after payment of all the cumulative dividends on the first preferred stock and before any payments on the common stock. It was provided, further, that the common stock should be entitled to dividends, as determined by the1945 U.S. Tax Ct. LEXIS 139">*146  board of directors, after the payment of dividends on the preferred stocks and "the exercise of the rights and obligations to redeem said First 6% Preferred Capital Stock." All classes of stock were to have equal voting rights.In the resolution adopted on December 28, 1935, it was stated that:304 shares of this issue having already been redeemed by the holder of 504 shares of this issue, the balance of 200 shares is to be redeemed on demand of the holder thereof during the year 1936.  Thereafter, 252 shares, as indicated on the Certificates representing the same, are to be redeemed on January 31, 1937, and on the 31st day of each succeeding January thereafter until this entire issue is redeemed and all accrued dividends to date of call or redemption.The quotation set forth above states that 304 shares of the new first preferred stock had already been redeemed. On December 28, 1935, the new stock had not yet been issued, so none of it could have been redeemed. There was no reference in the resolution of December 28, 1935, to the particular 2,520 shares of "subject to contract" stock.On December 28, 1935, a special meeting of the board of directors of the company was held at which1945 U.S. Tax Ct. LEXIS 139">*147  a unanimous resolution was adopted 5 T.C. 303">*307  increasing the capital stock from $ 600,000 to $ 1,644,000, said recapitalization to consist of 16,440 shares of stock of the par value of $ 100 each.  There was no provision in this resolution to cover the exchange of the various classes of new stock for the 6,000 shares of old common stock.On December 30, 1935, an amendment to the charter of the company was filed with the Secretary of State of Texas.  The amendment to the charter stated that the increase in capital stock in the amount of $ 1,044,000 had been subscribed by George Cohen and seven other individuals, none of whom was Agnes Cohen or petitioner.  It was not specifically stated in the amendment to the charter how the new preferred stock was to be issued, but, from the fact that the $ 1,044,000 of new common stock was subscribed by George Cohen and seven others, it is evident that it was intended that the 3,480 shares of second preferred stock were to be exchanged for the same number of shares of old common stock held by George Cohen; and that the 2,520 shares of first preferred stock were to be exchanged for the same number of shares of old common stock, namely, the "subject1945 U.S. Tax Ct. LEXIS 139">*148  to contract" stock.In article VII of the amendment to the charter reference was made to the contract of February 20, 1926, and to the 2,520 shares of "subject to contract February 20, 1926 stock." In referring to that stock it is said that "said stock should be redeemed on certain annual dates at the rate of $ 100 par value and no more." Then, the following appears:* * * it was unanimously voted, as part of the plan of recapitalization, to change the name of said stock so that the same be hereafter known as "First 6% Preferred Capital Stock", the certificates evidencing such capital stock to specify the same preferences and rights, as well as restrictions and limitations as set out in said contract; and that in compliance with said unanimous action of the stockholders, the Directors of the Company, at a meeting following said stockholders' meeting as aforesaid, by unanimous resolution duly changed the name (but none of the said contractual rights) of said "Subject to Contract February 20, 1926 Stock" to "First 6% Preferred Capital Stock", the certificates evidencing said stock to specify said preferences and rights as follows:* * * *On December 31, 1935, the new stock was issued1945 U.S. Tax Ct. LEXIS 139">*149  to the following individuals:First 6%Second 6%preferredpreferredCommonSharesSharesSharesPetitioner2,016Agnes L. Cohen200George S. Cohen3,41010,230F. E. Matzinger1030Leopold L. Meyer1030Leon E. Meyer1030Marcus H. Meyer1030Lasker H. Meyer1030Hyman G. Meyer1030Arthur M. Meyer1030Total2,2163,48010,4405 T.C. 303">*308  Agnes Cohen had surrendered 304 shares of common stock, certificate No. 49 and certificate No. 67, on September 10, 1935.  On the back of each certificate, over the signature of the secretary-treasurer, was typed the following: "Acquired by the Company as treasury stock on September 10, 1935."On December 31, 1935, a certificate for 304 shares of the new first preferred stock, certificate No. 1, was issued in the name of Foley Brothers Dry Goods Co., treasury stock account.  On the back of each of the certificates numbered 49 and 67 of the old common stock, the 304 shares surrendered by Agnes Cohen, the following appears: Canceled 12-31-35 and Certificate #1 dated 12-31-35 for similar shares of the recapitalization under amendment of charter of December 30, 1935 issued1945 U.S. Tax Ct. LEXIS 139">*150  in exchange therefor.On the face of certificate No. 49 and certificate No. 67 the word canceled is stamped in each corner of each certificate.The following statement appears on the face of the first 6 percent preferred stock certificates:The First 6% Preferred Capital Stock is entitled to a cumulative preferential dividend at the rate of, but never exceeding, 6% per annum on the par value of said stock, payable quarterly on the last day of April, July, October, and January of each year, and on the liquidation or dissolution of the Company preference over all other stock of the Company as to unpaid dividends and, to the extent of its par value, to the distributive share of the Assets.  304 shares of this issue having already been redeemed by the holder of 504 shares of this issue, the balance of 200 shares shall be redeemed on demand of the holder thereof during the year 1936.  Thereafter, 252 shares, as indicated on the Certificates representing the same, are to be redeemed on January 31st, 1937, and on the 31st day of each succeeding January thereafter until this entire issue is redeemed and all accrued dividends to date of call or redemption. Except as may be limited by1945 U.S. Tax Ct. LEXIS 139">*151  contract or the by-laws of the Company, said stock shall have equal voting powers with the Second 6% Preferred Capital Stock and the Common Capital Stock of this Company, and this stock shall not participate in any other rights, earnings, surpluses, distributions or property of the Company.On October 12, 1936, Agnes Cohen surrendered her certificate for 200 shares of first preferred stock. The company paid her $ 20,000.On December 31, 1935, 8 certificates of the first preferred stock were issued to petitioner, the certificates being numbered 3 to 10, inclusive.  The certificate for 252 shares of the old common stock, certificate No. 54, issued to petitioner on December 31, 1934, was surrendered by petitioner on December 31, 1935.  There is typewritten on the back of that certificate the notation that the certificate was canceled on December 31, 1935, and that certificates dated 12-31-35 were issued in exchange.  The word canceled is stamped on the face of certificate No. 54 in each corner of the certificate.On February 8, 1937, and in February of each year thereafter until and including February 1, 1944, petitioner surrendered one certificate for 252 shares of first preferred 1945 U.S. Tax Ct. LEXIS 139">*152  stock to the company and received 5 T.C. 303">*309  $ 25,200 upon the surrender of each certificate. Each of the certificates of first preferred stock surrendered by petitioner had documentary stamps affixed thereto and there was typed on the back of each certificate above the name of the secretary-treasurer, "Acquired by the Company as treasury stock."For each of the years since the amendment of the charter the capital stock account of the corporation, as reflected by its books, shows capital stock in the amount of $ 1,644,000, and the corporation reported to the Secretary of State of Texas the full capitalization of $ 1,644,000 for franchise tax purposes.  On the books of the corporation the various acquisitions of first 6 percent preferred stock by the corporation were debited to the treasury stock account.  However, in the capital stock tax returns filed by the corporation for 1939 and 1940 the payments to petitioner of $ 25,200 in each year were listed under the heading "liquidating distributions."The explanation of adjustment as set forth in the deficiency notice is as follows:It is held that the gain realized by you in each of the taxable years 1939, 1940 and 1941, upon the redemption1945 U.S. Tax Ct. LEXIS 139">*153  by Foley Brothers Dry Goods Company of Houston, Texas, of your shares of first 6% preferred stock of that corporation is a short-term capital gain within the purview of Section 115 (c) of the Internal Revenue Code, as representing an amount distributed in partial liquidation and therefore recognized to the extent of 100% and not a long-term capital gain.Originally, George Cohen agreed to purchase from the estate of his father, upon his father's death, 2,520 shares of common stock in Foley Brothers Dry Goods Co., under a written contract dated February 20, 1926.  When the company, upon due authorization, assumed the obligations of George Cohen under assignment on September 10, 1935, of the February 20, 1926, contract, the corporation obligated itself to purchase the stock originally owned by Robert Cohen from the then holders, Agnes Cohen and petitioner.  Subsequently, however, in December 1935, a plan to recapitalize the company was adopted.  Under this plan, a special class of preferred stock, namely, the first 6 percent preferred stock in the amount of 2,520 shares, was to be issued in exchange for the 2,520 shares of old common stock which had been owned originally by Robert Cohen. 1945 U.S. Tax Ct. LEXIS 139">*154  The company had in fact purchased 304 shares of the old common stock from Agnes Cohen on September 10, 1935, as it had agreed to and was authorized to do under the resolution adopted at the meeting of the stockholders held on February 7, 1935, but when the company was recapitalized the stockholders and directors, with the consent of petitioner and Agnes Cohen, who were both represented at the meeting of stockholders which was held on December 28, 1935, by proxy, decided that all of the new first preferred stock which was to be issued should be gradually redeemed by the company.  It was not provided in any resolution of the company 5 T.C. 303">*310  that the 2,520 shares of new first preferred stock should be purchased and held as treasury stock. On the face of the certificates for the first preferred stock it was provided, specifically, that said stock would be "redeemed" and the period of time within which the redemption was to take place was, also, clearly stated.  Thus, the company subsequent to February 7, 1935, through its stockholders, decided that the stock which was being acquired from the beneficiaries of the estate of Robert Cohen was to be redeemed.There was no formal resolution1945 U.S. Tax Ct. LEXIS 139">*155  adopted by the stockholders or the directors of the company to hold the 2,520 shares of new first preferred stock in the treasury of the company.  The secretary-treasurer of the company received his instructions from George Cohen, the president of the company.The amounts distributed to petitioner by the company in 1939, 1940, and 1941 upon her surrender of certificates representing first preferred stock constituted amounts distributed by the company in complete redemption of part of the corporate stock.OPINION.The only question before us is whether the amounts received by petitioner from the corporation in each of the taxable years were distributions in partial liquidation within the meaning of section 115 (c) of the Internal Revenue Code, 1 as respondent contends, or whether the amounts were received through a purchase of the stock by the corporation as petitioner contends.  If the transaction falls within section 115 (c), the full amount of the gain realized by petitioner is taxable to her, whereas if the transaction merely constituted a sale to the corporation, only 50 percent of the gain realized by petitioner is taxable to her under section 117 (b) of the code.  There is 1945 U.S. Tax Ct. LEXIS 139">*156  no dispute as to the basis of petitioner's stock, the length of the holding period, or the amount of gain realized by her.In support of his contention that the transaction constituted a distribution in partial liquidation within the meaning of section 115 (c), respondent points out that the corporation referred to the transaction1945 U.S. Tax Ct. LEXIS 139">*157  as a "redemption" in its stock certificates and in the resolution providing for the recapitalization of the corporation.  He also characterizes the first 6 percent preferred stock as a "limited purpose" stock 5 T.C. 303">*311  which, he argues, could not have been resold or reissued, and therefore must be deemed to have been retired upon acquisition by the corporation.  Respondent cites George F. Jones, 4 T.C. 854; Hamilton Allport, 4 T.C. 401; Williams Cochran, 4 T.C. 942; and L. B. Coley, 45 B. T. A. 405, in support of the general proposition that the transaction constituted a partial liquidation under section 115 (c).Petitioner argues that section 115 (c) only applies where stock is acquired for cancellation or retirement and not where it is purchased and held as treasury stock. She relies upon Alpers v. Commissioner, 126 Fed. (2d) 58; Borg v. International Silver Co., 11 Fed. (2d) 147; W. C. Robinson, 42 B. T. A. 725; R. W. Creech, 46 B. T. A. 93;1945 U.S. Tax Ct. LEXIS 139">*158  and William A. Smith, 38 B. T. A. 317.Section 115 (i) of the Internal Revenue Code defines a distribution in partial liquidation as a "distribution by a corporation in complete cancellation or redemption of a part of its stock, or one of a series of distributions in complete cancellation or redemption of all or a portion of its stock." As pointed out in George F. Jones, supra, however, in determining whether a partial liquidation has taken place, the controlling factor is the intent of the corporation in reacquiring its stock. If stock is purchased to be canceled and retired, the seller receives a distribution in partial liquidation. Hill v. Commissioner, 126 Fed. (2d) 570; Cohen Trust v. Commissioner, 121 Fed. (2d) 689; Hammans v. Commissioner, 121 Fed. (2d) 4. However, if stock is purchased to be held as treasury stock subject to resale, an ordinary capital transaction results.  Alpers v. Commissioner, supra;W. C. Robinson, supra;William A. Smith, supra;1945 U.S. Tax Ct. LEXIS 139">*159 Harold F. Hadley, 1 T.C. 496.The situation presented by the facts in this case is perfectly clear.  The result which must be reached perhaps is a harsh result, because when the company was reorganized one class of preferred stock could have been issued instead of two classes and such preferred stock could have been free from any condition that it must be redeemed, and, further, such stock could have been of a character which was susceptible of being held as treasury stock. The question must be decided on the basis of what was done rather than what could have been done.  The question arises under section 115 (c), and the statute is controlling.Respondent's argument that the first preferred stock of the company was a "limited purpose stock" which was issued by the company with the intention of redeeming it within a few years is sound, and is supported by the facts.  This is best illustrated by comparing the statement of the privileges of the second preferred stock with the statement of the privileges of the first preferred stock. That which is stated on the face of the certificates for the second preferred stock is limited to 5 T.C. 303">*312  the usual statement1945 U.S. Tax Ct. LEXIS 139">*160  of the rights to preferential dividends and the rights to a distributive share of the assets of the corporation upon liquidation, and the voting rights.  There is no reference or statement to a planned redemption of said second preferred stock within a certain number of years as is stated on the face of the certificates for the first preferred stock. The second preferred stock was and is stock that is susceptible of purchase by the company and holding as treasury stock for possible resale. But the first preferred stock was not, by its terms, susceptible of any resale after surrender to the corporation by Agnes Cohen and petitioner.  Of course, they are not mentioned by name on the face of the certificates for the first preferred stock which were issued on December 31, 1935, but any reasonable inquiry into the records of the company would show that on December 31, 1935, 504 shares of "this issue" namely, the first preferred stock, were owned by Agnes Cohen, and 252 shares were owned by petitioner.  The following words on the face of the certificates for the first preferred stock can not be ignored in the determination of the question which is presented: "304 shares of this issue 1945 U.S. Tax Ct. LEXIS 139">*161  having already been redeemed by the holder of 504 shares of this issue, the balance of 200 shares shall be redeemed on demand of the holder thereof during the year 1936.  Thereafter, 252 shares, as indicated on the certificates representing the same, are to be redeemed on January 31, 1937, and on the 31st day of each succeeding January thereafter until this entire issue is redeemed and all accrued dividends to date of call or redemption." It is perfectly obvious that a decision was made when the company was reorganized to issue a special class of stock for the sole purpose of taking care of the object of the agreement of February 20, 1926, and that when that object had been fulfilled through the use of the special stock, to wit, the first preferred stock, that special stock could not be used by any new holder acquiring any shares of the first preferred stock after the periods within which the stated amounts of first preferred stock were to be redeemed. The object of the 1926 agreement was to guarantee to the widow of Robert Cohen, and the beneficiaries under his will, receipt of $ 252,000, the par value of his shares of old common stock. Of course, it is conceivable that Agnes Cohen1945 U.S. Tax Ct. LEXIS 139">*162  or petitioner could have assigned their certificates for first preferred stock to another person, and that such assignee, or assignees, would be entitled to the rights set forth on the certificates of the first preferred stock. But it is perfectly clear that after the company fulfilled its obligations under the terms of the first preferred stock to Agnes Cohen, or petitioner, or their assignees, if any, then the corporation's obligations with respect to "this issue" of the first preferred stock ended.  It is inconceivable that any outsider would purchase any first preferred stock from the company in the event that the company undertook to issue new certificates under 5 T.C. 303">*313  that issue after Agnes Cohen and petitioner surrendered the certificates which were issued to them in 1935.  It is inherent in the concept of treasury stock that stock which is so held in the treasury of a corporation is of a type which can be sold to the public; otherwise, treasury stock could not possibly be considered as an asset of the corporation.  What is said above is said with particular reference to the facts in this case, and nothing further need be said to amplify the point.In Regulations 103, sec. 1945 U.S. Tax Ct. LEXIS 139">*163  19.115-5, par. c, p. 331, there is given a very good example, as follows: "A complete cancellation or redemption of a part of the corporate stock may be accomplished, for example, by the complete retirement of all of the shares of a particular preference or series * * *." In this case, upon the reorganization of the company, a particular preference and series of stock was issued; it was stated that the said particular preference of stock was to be redeemed.Due consideration has been given to the notations which were typed on the backs of the certificates of the first preferred stock which were surrendered by petitioner and Agnes Cohen, to the effect, that the certificate was acquired by the company as "treasury stock." The secretary-treasurer of the company was the person who made the notations on the stock certificates. He testified at first that he received his instructions from the board of directors, through the president of the company, to open a treasury account and to mark the stock accordingly.  However, upon further question, he stated that there was not in evidence in this proceeding any resolution of the directors or the stockholders that the first preferred stock should1945 U.S. Tax Ct. LEXIS 139">*164  be held as treasury stock, and he testified that he did not know of any formal resolution.  He was the secretary of the company and if there had been a resolution adopted at any meeting he would have written the minutes of the meeting.  Upon further questioning he testified that his instructions with reference to treasury stock came from the president of the company, and that testimony is understood to mean that his instructions came from the president of the company only.  The president was George Cohen, the majority stockholder. His instructions are at variance with the terms of the first preferred stock and of the minutes of the special meeting which was held on December 28, 1935, and with the terms of the amendment to the charter of the corporation which was filed on December 30, 1935.Under all the facts we can not find any justification for holding that the first preferred stock was issued by the company with the intention that it was to be purchased from Agnes Cohen and petitioner and held as treasury stock. The contrary is supported by the evidence.  Therefore, this case does not come within the rule of such cases as petitioner relies upon, where the facts show that it was1945 U.S. Tax Ct. LEXIS 139">*165  the intent of the corporation in reacquiring its stock to purchase the stock for holding in the treasury. Rather, the facts here are clear that the first preferred stock 5 T.C. 303">*314  was to be redeemed. It is and was not material whether the stock was marked canceled when it was reacquired.  The redemption of the stock in itself effected a cancellation of the stock for all practical purposes.  It is exceedingly doubtful whether the stock could be reissued, and unless it could be reissued it does not have the main attribute of treasury stock. Hamilton Allport, supra.Respondent's determination is sustained.Decision will be entered for the respondent.  Footnotes1. SEC. 115. DISTRIBUTION BY CORPORATIONS.* * * *(c) Distributions in Liquidation. -- Amounts distributed in complete liquidation of a corporation shall be treated as in full payment in exchange for the stock, and amounts distributed in partial liquidation of a corporation shall be treated as in part or full payment in exchange for the stock. The gain or loss to the distributee resulting from such exchange shall be determined under section 111, but shall be recognized only to the extent provided in section 112.  Despite the provisions of section 117, the gain so recognized shall be considered as a short-term capital gain, except in the case of amounts distributed in complete liquidation. * * *↩