Court Opinion

ID: 4619269
Source: CourtListenerOpinion
Date Created: 2020-11-21 02:40:15.692071+00
Date Added: 2024-06-11T07:55:36.549522
License: Public Domain

PAUL B. HUNT, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.  GEORGE C. SHEPARD, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Hunt v. CommissionerDocket Nos. 49508, 49509.United States Board of Tax Appeals36 B.T.A. 268; 1937 BTA LEXIS 746; June 30, 1937, Promulagated 1937 BTA LEXIS 746">*746  After negotiations for the acquisition of the stock or assets of A company, an ice company, petitioners caused B company to be organized to carry on the same business.  They entered into an agreement with a bank as escrow agent under which stock of A company was to be deposited, they to have the exclusive right to purchase it for a stipulated amount to be paid in cash and preferred stock of B company.  Experiencing some difficulty in raising the requisite cash, petitioners subsequently entered into an agreement with A company in which they agreed to pay it cash and preferred stock of B company in exchange for its assets.  A portion of the assets was conveyed to B company, B company pledged them as security for a bond issue and secured $337,838.54.  This sum, together with the cash which A company had on hand amounting to $109,303.06, was turned over to the escrow agent.  The remaining assets of A company were turned over to petitioners.  The escrow agent paid the cash to the stockholders of A company and the president of B company delivered to them the preferred stock specified in the escrow agreement.  One of petitioners then signed a receipt for the stock.  A company was left without1937 BTA LEXIS 746">*747  assets or property with which to pay the tax on the profit resulting from the sale or disposition of its assets.  Held:(1) Former decision by this Board that stockholders of A company were not liable as transferees is not res judicata of the issue in these proceedings.  (2) The assumption of existing liabilities of A company by petitioners and their nominee, B company, did not include the tax liability here in dispute as it is based upon the profit realized upon the sale of A company's assets, and did not materialize until after the sale of the assets was completed.  (3) The taxable fund was the purchase price which petitioners promised to pay to A company, and it rightfully belonged to that company.  Its diversion and appropriation by petitioners to their private use, since it left A company without funds to pay the tax on the profit resulting from the sale of its assets, made the petitioners liable for the deficiencies asserted against them as transferees.  H. A. Mihills, C.P.A., for the petitioners.  J. R. Johnston, Esq., for the respondent.  MELLOTT36 B.T.A. 268">*269  The respondent determined a deficiency in the amount of $37,766.04, in the1937 BTA LEXIS 746">*748  income tax of the City Ice & Supply Co., an Illinois corporation, for the calendar year 1926.  The corporation having no assets with which to pay the tax, he now seeks to collect it from petitioners, as transferees, under the provisions of section 280 of the Revenue Act of 1926.  The proceedings were duly consolidated for hearing, and the same issue is involved in each.  FINDINGS OF FACT.  The petitioners are residents of the State of Ohio.  In the fall of 1925 or early in 1926 they began negotiations for the acquisition of the stock or assets of the City Ice & Supply Co., an Illinois corporation, and for the formination of a new company to carry on substantially the same business.  The capital stock of the City Ice & Supply Co. (hereinafter called the old company) consisted of 3,325 shares of common stock and 1,000 shares of preferred stock, each of the par value of $100 per share.  On February 8, 1926, M. L. Tewes and Lewis S. Roth, who were stockholders and officers of the old company, gave petitioners a 30-day option to purchase the common capital stock of that company at $200 per share, specifically agreeing that there would be ready for purchase by the petitioners, if and1937 BTA LEXIS 746">*749  when the option were exercised, a majority of the stock of the said company.  This option was never exercised by petitioners.  On March 10, 1926, petitioners entered into an agreement with the Stony Island State Savings Bank (hereinafter referred to as escrow agent).  The escrow agent agreed to accept and hold in escrow all certificates representing shares of the capital stock of the old company when and if offered for deposit, provided all such certificates were endorsed in blank by the owners thereof, and were accompanied 36 B.T.A. 268">*270  by an escrow and option agreement signed by each owner defining the donditions under which the deposit was made.  The escrow agent was to receive for its services 10 cents per share for each share of stock deposited, and petitioners paid it $250 on the date the agreement was executed.  The agreement also provided that the escrow agent's responsibility to the depositors of the stock and to the petitioners was limited to that imposed by the terms of the escrow and option agreement.  The escrow and option agreement provided, among other things, that the stockholders would vote the stock or execute the proxy to vote it as requested by petitioners so1937 BTA LEXIS 746">*750  as to bring about the reorganization of the old company or sale of its assets; that petitioners should have the exclusive option to purchase the stock deposited with the escrow agent and that the latter would deliver it to them, or on their order, upon the delivery by them of payment to the escrow agent for the account of the stockholders of $200 per share for common stock (two-thirds in cash and one-third in 7 percent cumulative preferred stock of the Illinois corporation taking over the assets of the old cpmpany); that the preferred stock of the old company deposited with the escrow agent would be redeemed at $105 per share and accrued dividends from December 31, 1925; that the stock deposited would not be withdrawn and the option and agreement would be effective until April 10, 1926; that the time might be extended by the escrow agent for 30 days additional if in the opinion of the investment brokers, Schultz Brothers & Co. of Cleveland, Ohio, the transaction was in the process of closing and was likely to be closed within 30 days; and that petitioners should use their best efforts to organize and finance a new corporation.  On April 30, 1926, a special meeting of the board of1937 BTA LEXIS 746">*751  directors of the old company was held, the minutes of that meeting, in so far as they are here pertinent, being as follows: The president called the meeting to order and stated that the occasion for this meeting was to consider details recommended by counsel for George C. Shepard and Paul Hunt in furtherance of their proposal heretofore made for the reorganization of this Company.  It was stated that the plan contemplated the formation of a new Illinois corporation with the same name as the present company which should succeed to the physical assets, securities and inventories of this corporation, and in return therefor carry out the provisions and conditions stated in the various escrow memoranda on file with the Stony Island State Savings Bank in commection with the deposit of most of the stock of this corporation.  On May 6, 1926, petitioners caused the City Ice & Coal Co. (hereinafter referred to as the new company) to be organized as a corporation under the laws of the State of Illinois, and on the same 36 B.T.A. 268">*271  date they submitted an offer to the old company which, omitting caption, salutation and signatures, is as follows: The undersigned propose, in consideration1937 BTA LEXIS 746">*752  of your causing to be conveyed to us or our nominees all of the physical assets, bills receivable, accounts receivable, securities and inventories of your company, that we shall cause to be paid, delivered and surrendered to your corporation: (a) A sum of money which, added to the cash held by the Company will be equal to 105% of the par value of the 1000 shares of the preferred stock of your company and accrued dividends thereon to May 10, 1926, plus 133 1/3 percent of the par value of the 3325 shares of the common stock of the Company.  (b) 2216 2/3 shares of the 7% Cumulative Preferred Stock of City Ice & Coal Company, an Illinois Corporation, which company shall acquire from us and be vested with the principal portion of your property, upon which this proposition is based.  This offer is made with the understanding that the same shall be acted upon by the Board of Directors of your company at a meeting to be held May 7, 1926, and at a meeting of stockholders of your Company to be held on notice heretofore issued, May 10, 1926; and if accepted the transactions herein proposed shall be fully and effectively consummated not later than noon of the 10th day of May, 1926, it being1937 BTA LEXIS 746">*753  further understood that the sum of money to be paid by us pursuant to paragraph (a) above shall be computed on the showings of the Company's books as of the close of business on May 8, 1926, as the same may appear May 9, 1926.  All existing liabilities of City Ice and Supply Company to be assumed and paid by the parties making this proposition and payment thereof guaranteed by the corporation to whom will be made the conveyance herein contemplated.  This offer was duly accepted by the old company's directors on May 7, 1926.  On May 6, 1926, petitioners signed a letter, directed and delivered to the new company, reading as follows: Steps have been taken by the undersigned to acquire the physical properties and certain other assets of the City Ice & Supply Co., an Illinois corporation, chiefly engaged in the manufacture and sale of ice in the City of Chicago.  Such acquisition being on the basis of assumption and payment by us of all liabilities and obligations of said City Ice and Supply Company.  We propose to cause to be conveyed to you certain of such assets as set forth in the statement hereto attached marked "Schedule A", in consideration of the payment and delivery to1937 BTA LEXIS 746">*754  us or our nominees of (a) The sum of $337,500 in cash (less the amount necessary to retire the existing bonded indebtedness of said City Ice and Supply Company.  (b) 2500 shares of the 7% Cumulative Preferred Stock of your corporation.  (c) 19,800 shares of the Common Capital Stock of your corporation.  (d) Your guaranty of the payment in due course of all the existing liabilities of said City Ice and Supply Company.  This offer is made with the understanding it will be considered and finally acted upon at meetings of your Board of Directors and Stockholders held May 7, 1926.  36 B.T.A. 268">*272  On the same day, May 6, 1926, the directors of the new company accepted the offer contained in the above letter, the stockholders later ratifying their action.  The resolution of acceptance contained this provision: (d) and further as a part of the consideration for the property so to be acquired by this corporation that this company shall guarantee to said Hunt and Shepard and to City Ice and Supply Co. all the liabilities and obligations of said City Ice & Supply Co. as they exist at the close of business on May 7, 1926; the officers are hereby empowered and directed to execute and1937 BTA LEXIS 746">*755  deliver to said Hunt and Shepard and to City Ice & Supply Co. all instruments and writings convenient or appropriate evidencing such guaranty.  The old company closed its books as of May 8, 1926, and the new company took over its business on the same date.  On May 10, 1926, petitioners signed and delivered to the old company the following letter addressed to it: Referring to the purchase by the undersigned of the real estate, improvements, machinery, equipment, fixtures, investments, bills receivable and accounts receivable, of your company, pursuant to our written proposition to you, dated May 6, 1926, and submitted to your Board of Directors at a meeting thereof held May 7, 1926, we hereby direct that you execute, acknowledge and deliver the necessary instruments of conveyance for the transfer, assignment and conveyance of all of said property so purchased by us to City Ice and Coal Company, an Illinois corporation, having its principal office and place of business in the City of Chicago, County of Cook and State of Illinois, with the exception of the items referred to in the balance sheet of your company prepared by Ernst and Ernst, as of date March 31, 1926, under the headings1937 BTA LEXIS 746">*756  "Marketable Securities" and "First Mortgage Notes Receivable", which items shall be assigned and delivered by you to us.  It is the object of this memorandum effectively to designate and constitute said City Ice and Coal Company and ourselves, respectively, as our nominees to whom shall be conveyed, assigned and delivered the property purchased by us in pursuance to our written offer above mentioned.  Dated Chicago, Illinois, May 10, 1926.  The original plan was that petitioners should raise sufficient cash to acquire the common and preferred stock of the old company by the payment of $200 per share for the common and $105 per share, plus accrued dividends, for the preferred.  Petitioners experienced difficulty in raising the large amount of cash necessary to carry out this plan, so another plan was evolved and carried out whereby the cash which the old company had on hand, together with the proceeds from the sale of bonds of the new company, was used to make the necessary payment.  The substituted or modified plan was carried out as follows: The Guardian Trust Co., which had been designated as trustee under a first mortgage bond issue of the new company, had on hand $337,838.54, 1937 BTA LEXIS 746">*757  derived through the sale of an issue of $375,000 of bonds of the new company at $90.  Inasmuch as the property which the new company expected to receive from the old company was the 36 B.T.A. 268">*273  major portion of, if not all, the assets pledged as security for said bonds, the Guardian Trust Co. refused to pay over to the new company or to its stockholders the amount in its hands as trustee until a deed, conveying the real estate of the old company to the new company, had been placed on record.  Such deed was executed by the old company to the new company and placed on record in the office of the recorder of deeds at 3:50 p.m. on May 10, 1926, whereupon the Guardian Trust Co., at the request of petitioners, made out and delivered to the escrow agent, on May 10, 1926, a check payable to it in the amount of $337,838.54.  Also on May 10, 1926, but the evidence does not disclose whether it was prior to, contemporaneously with, or subsequent to the transaction set out in the preceding paragraph, the old company issued and delivered to the escrow agent a check for $109,303.06, representing all of the cash which the old company had on hand on that date.  On the same date the remaining assets1937 BTA LEXIS 746">*758  of the old company, with the exception of "Marketable Securities" and "First Mortgage Notes Receivable", were transferred to the new company, as the nominee of petitioners, the "Marketable Securities" and "First Mortgage Notes Receivable" being transferred directly to petitioners on the same date.  The stockholders of the old company, on or prior to May 10, 1926, had endorsed in blank and deposited with the escrow agent all of the common and preferred stock of that company and had signed the escrow and option agreement hereinabove referred to.  After the escrow agent received the above checks, aggregating $447,141.60, it paid said amount to the stockholders of the old company.  At the same time the president of the new company delivered to the stockholders of the old company 2,254 1/2 shares of the preferred stock of the new company.  With two exceptions, each stockholder received the amount of cash and preferred stock specified in the escrow and option agreement.  Mrs. Martha L. Tewes, who owned 1,256 shares of common and 75 shares of preferred stock in the old company, accepted a note for $100,000 signed by petitioners in lieu of a portion of the cash to which she was entitled. 1937 BTA LEXIS 746">*759  Lewis S. Roth, who owned 40 shares of common and 36 shares of preferred in the old company, accepted 37 additional shares of preferred stock in the new company in lieu of $3,700 in cash to which he was entitled.  These two exceptions were due to the fact that petitioners had planned to borrow $200,000 from the Stony Island State Savings Bank, but at the last moment were unable to consummate the loan.  The escrow agent made the distributions above set forth pursuant to and in accordance with the terms of the escrow agreement.  36 B.T.A. 268">*274  Each stockholder, upon receiving the cash and preferred stock to which he was entitled, signed a receipt reading as follows: CHICAGOMay 1926RECEIVED OF STONY ISLAND STATE SAVINGS BANK  Dollars in cash and shares Preferred Stock of City Ice & Coal Company in full settlement of all claims and demands whatsoever under or arising out of stock of City Ice & Supply Company deposited in Escrow under agreement with Paul B. Hunt and George C. Shepard.  After the stockholders had been paid for their stock as above set forth, petitioner George C. Shepard signed the following receipt, the last sentence being, presumably, in his handwriting: 1937 BTA LEXIS 746">*760  May 11, 1926.  RECEIVED OF Stony Island State Savings Bank forty (40) options and Forty-three Hundred and Sixty-five (4365) shares of Capital Stock representing all of the common and Preferred Stock of City Ice & Supply Company which delivery constitutes completed performance by Stony Island State Savings Bank of Escrow Agreement dated March 10, A.D. 1926.  After cancellation these certificates can be returned to Lewis Roth to complete records of City Ice & Supply Co.  George C. Shepard.  May 12, 1926.  (The total number of shares of the capital stock of the old company was 4,325 and the figure used in the above receipt, 4,365, is obviously in error.) Shepard did not take physical possession of the stock for which he receipted.  The stock was offered to him, but his attorney, one Ogden, said: "We don't want it; it is not ours." The stock was left with the escrow agent, and someone from the office of the old company called for it.  The old company never actually received the cash and preferred stock which petitioners in their offer of May 6, 1926, promised would "be paid, delivered and surrendered" to it in consideration for the conveyance of its assets.  After May 10, 1926, the1937 BTA LEXIS 746">*761  old company had no assets and did not engage in business.  The new company thereafter carried on substantially the same kind of business as that formerly engaged in by the old company and at the same place of business.  The new company, on incorporation, issued 200 shares of common stock of which Hunt owned 96 and Shepard 96, the remaining 8 being scattered.  Additional shares of common stock of the new company were subsequently issued to petitioners in accordance with the offer which they submitted to the new company on May 6, 1926.  Petitioners were, at all times material herein, officers and directors of the new company.  36 B.T.A. 268">*275  The old company kept its books and filed its income tax return for the year 1926 on the accrual basis.  It did not report as income in that year any profit from the sale of its assets.  The respondent determined that the old company's basis for gain or loss on the assets sold was $281,756.79; that the amount realized was $559,505.21 ($337,838.54 in cash plus $221,666.67 value of preferred stock of new company) and that the sale resulted in a net profit of $277,748.42, which should have been reported in its income for 1926.  Respondent added this1937 BTA LEXIS 746">*762  profit to the income reported by the old company in that year and determined a deficiency in tax of $37,766.04.  The old company having no assets, deficiencies were determined against the petitioners, under the provisions of section 280 of the Revenue Act of 1926, as transferees of the property of the old company.  OPINION.  MELLOTT: Many of the facts set out in the above findings were considered by this Board in proceedings brought by 16 stockholders of the City Ice & Supply Co. (the old company) to set aside deficiencies determined against them as transferees of such company.  The proceedings were consolidated for hearing, an unpublished memorandum opinion of the Board was filed, and on October 4, 1933, decision was duly entered that petitioners were not liable as transferees.  (See Fred Messerschmidt et al., Docket No. 47848.) The record in that hearing is not in evidence in the instant proceedings, though the same documents that were offered and received as exhibits therein, in addition to others, are again in evidence before us.  Petitioners contend that the decision of the Board in the Messerschmidt case, supra, is res judicata of the present controversy; 1937 BTA LEXIS 746">*763  but not so.  The question determined therein was whether the stockholders of the old company - not these petitioners - were liable as transferees.  These petitioners were neither parties to that proceeding nor in privity with the parties therein.  Hence the doctrine relied upon is inapplicable.  ; ; . Nor is it material that the Commissioner has abandoned the theory relied upon in the Messerschmidt case, and now seeks to hold these petitioners as transferees.  There is nothing in the law which would preclude him from determining a deficiency against one group of taxpayers on one theory and against another group on an entirely different theory.  Of course, he can not recover the same tax twice; but he is not attempting to do so.  36 B.T.A. 268">*276  The fact that some of the findings herein are at variance with those made in the Messerschmidt case is not being overlooked.  Thus it was there held, under the evidence then before the Board, that the outstanding1937 BTA LEXIS 746">*764  preferred stock of the old company was redeemed by it out of its own assets, after which the stockholders of the old company sold their common stock to Hunt and Shepard.  But evidence in addition to that which was before the Board when such finding was made has now been adduced, which convinces us that the transfer of the assets of the old company to Hunt and Shepard, and to their nominee, the new company, occurred prior to the sale of the stock under the escrow agreement.  Moreover, both parties tacitly admit that the assets were transferred prior to the sale of the stock.  It is also apparently admitted by both parties that the basis for determining the gain or loss from the sale or other disposition of the property of the old company was $281,756.79.  If the assets were disposed of in a transaction in which gain or loss under the statute was to be recognized, then it must be held that the old company - it keeping its books on the accrual basis - should have accrued upon its books the sum of money plus the fair market value of the property which it was entitled to receive.  (Sec. 202(c), Revenue Act of 1926.) Its gain, therefore, which should have been accrued upon its books is, 1937 BTA LEXIS 746">*765  as computed by the respondent, the excess of the amount realized - $337,838.54 cash, plus $221,666.67, value of the preferred stock of the new company - over the basis of $281,756.79, or $277,748.42.  But, say petitioners in their pleadings: (a) The assets were acquired by them from the old company as purchasers for value, an adequate consideration being paid therefor; (b) they were not at any time owners of the capital stock of the old company; and (c) the proposal for the purchase of the assets of the old company by them, and under which such purchase was made, while it contained an agreement that they, as purchasers, were to assume all existing liabilities of the old company, did not contemplate that any liabilities other than those appearing upon the books of the company as of the close of business on May 8, 1926, should be assumed or paid by them.  The respondent contends that petitioners, through their agents and attorneys, having suggested a plan thereafter carried out, by which they were to purchase all of the assets and continue the going business of the old company, for a consideration of cash and stock, which cash and stock were to be distributed and were distributed1937 BTA LEXIS 746">*766  to the stockholders of the vendor corporation, as part of the general plan, have thus made themselves liable, under the trust fund doctrine, for the income taxes of the vendor, it being thus deprived of any means of making payment of such taxes.  36 B.T.A. 268">*277  In support of this contention respondent relies upon the well settled principle of law that where assets of a corporation are sold for an equivalent consideration, which under an agreement is paid to the stockholders, leaving the corporation without assets to satisfy its creditors, the purchasing corporation is liable to creditors of the selling corporation to the extent of the value of the property received, the sale being in fraud of creditors and the purchaser being a party to such fraud through his knowledge that the result of the transaction must necessarily leave such creditors with no assets from which to satisfy their claims.  ; ; ; 1937 BTA LEXIS 746">*767 ; ; and ; and . Upon brief petitioners argue, first, that the tax liability here under consideration not only was not known at the time of the conveyance of the assets, but also could not have materialized until after the assets were sold, and hence no liability existed which could have been, or was, assumed by them as purchasers.  We agree.  The liability for the tax did not arise until the assets were transferred.  The assumption by the petitioners of the existing liabilities of the old company did not include the tax here in dispute.  Nor did the transfer of the assets ipso facto constitute a fraud upon the United States as a creditor; for it was not a creditor of the old company prior to, or at the time, the assets were transferred.  We also agree with petitioners' contention that the principle of law and the cases relied upon by the respondent relating to tax liabilities imposed as a result of the operations1937 BTA LEXIS 746">*768  of a business and to liabilities which accrued and existed prior to the date of the conveyance of the assets are not determinative of the issue before us.  The case at bar, as pointed out by petitioners, is somewhat analogous to . In that case the corporation purchased assets of another corporation for $337,500 and assumed the selling companies' liabilities as of a specified date, together with subsequent liabilities incurred in ordinary routine business.  The purchaser paid the seller the purchase price of $337,500 and the latter distributed it to its stockholders.  Neither the purchaser nor its stockholders participated in the profits of the sale.  The tax return of the seller showed a tax liability resulting from the profits of the sale, which the respondent proposed to assess and collect from the purchaser under section 280 of the Revenue Act of 1926.  The Circuit Court of Appeals for the Second Circuit decided that the purchasing corporation did not 36 B.T.A. 268">*278  assume the liability for the tax imposed on the profit; this liability did not arise until the sale was completed and was not therefore an1937 BTA LEXIS 746">*769  existing liability.  The court said: A tax on the profits of a sale such as is involved here is one of extraordinary liability, and, unless assumed in plain terms, ought not to be imposed upon the transferee of the property.  Where the parties spoke they referred to the liabilities incident to the business.  An income tax on the seller's profits is not a liability of the business; it is a liability which follows the sale, and the business changes hands before the tax liability arises.  * * * A purchaser of property for value has, in his position as a transferee, no liability to pay his vendor's tax; if he incurs such, he does so by a promise ex contractu. His liability is not the liability of the transferee but the liability of a promisor.  The act deals with the peculiar liability of the transferee.  Here there was no taxable fund until after the sale, and the petitioner never partook of a taxable fund because no tax liability arose except upon receipt by the seller of the purchase price.  That, and not the assets sold, constitutes the taxable fund.  There could not be any claim against the transferred assets.  Therefore section 280 creates no liability; it is remedial and1937 BTA LEXIS 746">*770  presupposes a liability for the enforcement of which it is designed to furnish a remedy.  But there are a number of important differences between the facts in the instant proceedings and those in  In the Reid case the purchaser paid the seller the purchase price.  In the instant proceedings, although petitioners promised that they would cause the purchase price to be paid, delivered, and surrendered to the old company, they did not do so.  In the Reid case the findings show that the purchaser did not participate in the profits of the sale.  In the instant proceedings petitioners appropriated to their private use the entire proceeds of the sale.  They used these proceeds to purchase the stock of the old company under the terms of the escrow and option agreements.  When they did this, they were not acting as the agents of that company.  They, and not the old company, were parties to the agreement whereby the escrow agent was to purchase the stock with funds they were to furnish.  That they exercised the exclusive option given them is apparent from the receipts given by the stockholders and the receipt which Shepard executed1937 BTA LEXIS 746">*771  for the stock.  The remaining contentions of the petitioners may be considered together.  True it is that if petitioners had purchased the assets of the old corporation for an adequate consideration, which had been paid to it, they would not be liable for the vendor's tax upon such transaction, in the absence of an express agreement to pay it.  ( ) But they did not pay the consideration for the assets of the old company to it.  Instead of doing so they appropriated the funds and property, which under their contract they promised would be delivered to it - cash 36 B.T.A. 268">*279  in the amount of $337,838.54 and preferred stock of the new company of the value of $221,666.67 - and used it to purchase the stock of the old company from its stockholders in accordance with the terms of the escrow and option agreements.  As pointed out, supra, the old company kept its books and filed its income tax returns on the accrual basis.  When it transferred its assets to petitioners and their nominee, it was required to accrue upon its books the consideration which was to be paid (1937 BTA LEXIS 746">*772 ) and its liability for the tax upon the profit immediately came into being and likewise should have been accrued.  The Government had a perfect right to look to the proceeds of the sale for the payment of the tax.  Such proceeds constituted the taxable fund to which the tax attached.  ( ) In equity, if not in law - and we need not decide which - such fund should have been used for the payment of the tax.  The diversion and appropriation of this fund by these petitioners, leaving the old company without funds to pay the tax upon the profit derived from the disposition of its assets (cf. ; ), made them liable for the payment of the tax.  We hold that the respondent did not err in determining that the petitioners are liable under the provision of section 280 of the Revenue Act of 1926, as transferees of the property of the City Ice & Supply Co., in respect of the income tax imposed upon said company for the year 1926.  1937 BTA LEXIS 746">*773  Reviewed by the Board.  Judgment will be entered for the respondent.