Court Opinion

ID: 4589937
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:02:34.69001+00
Date Added: 2024-06-11T07:50:22.455862
License: Public Domain

GUS T. DODD, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Dodd v. CommissionerDocket No. 99323.United States Board of Tax Appeals46 B.T.A. 7; 1942 BTA LEXIS 919; January 6, 1942, Promulgated *919  During 1935 the Coca-Cola Co. acquired and retired 200,000 shares of its class A preferred stock, a part of which had been held by International, a holding company.  Petitioner was a stockholder in International.  One share of International A was equivalent to two shares of Coca-Cola A.  During 1935 petitioner authorized his agent to sell and deliver to the Coca-Cola Co. 1,200 shares of Coca-Cola A.  Petitioner then delivered 600 shares of International A to an escrow agent whose authority under the contract was broad enough to authorize it to exchange the 600 shares of International A for 1,200 shares of Coca-Cola A for petitioner's account.  The escrow agent made the exchange and then delivered the 1,200 shares of Coca-Cola A to the Coca-Cola Co. for cash, and then turned the cash over to petitioner by check less certain expenses.  Held, the exchange of petitioner's International A stock for Coca-Cola A stock represented "amounts distributed in partial liquidation" of International, as that term is used in section 115(c) and defined in section 115(i) of the Revenue Act of 1934; and that 100 percent of petitioner's gain, offset by the loss which he incurred in the sale of Coca-Cola*920  A stock, should be taken into his account in computing net income as provided in section 115(c), rather than 40 percent thereof as provided in section 117(a) of the same act.  L. B. Coley,45 B.T.A. 405">45 B.T.A. 405, followed.  John E. McClure, Esq., Pope F. Brock, Esq., Granger Hansell, Esq., and C. Baxter Jones, Esq., for the petitioner.  F. L. Van Haaften, Esq., for the respondent.  BLACK *8  This proceeding involves a determination by the respondent of a deficiency in income tax against petitioner for the calendar year 1935 in the amount of $25,380.70.  In his income tax return petitioner reported a profit of $15,292.22 from the sale of 600 shares of Coca-Cola International Corporation class A stock as follows: SharesSale PriceCostTotal ProfitPercentage Taken into AccountTaxable Profit500$52,255.00$10,095.28$42,159.7230%$12,647.92505,225.501,555.293,670.2130%1,101.06505,225.501,367.403,858.1040%1,543.2460062,706.0013,017.9749,688.0315,292.22The sale price was reported on the basis of $105 per share, less an exchange fee of $114 and a handling charge*921  of $180, thus leaving $62,706 as the net proceeds.  The respondent, in his deficiency notice, increased this reported taxable profit of $15,292.22 by $47,413.78, determined as follows: Value of 1200 shares of The Coca Cola Company Class A stock received in exchange for 600 shares of Coca Cola International Corporation Class A stock (1200 at 56 7/8 minus $1.30 dividend)$66,690.00Less:BasisZeroExchange cost$114.00114.00Taxable gain (100% to be taken into account)$66,576.00Sale of 1200 shares of The Coca Cola Company Class A stock, through The Equitable Company, Atlanta, Georgia, to The Coca Cola Company for retirement (1200 at 52 1/2)$63,000.00Less:Basis (as above)$66,690.00Handling charge180.0066,870.00Deductible loss (100% to be taken into account since stock held less than one year)$3,870.00SummaryGain on exchange$66,576.00Loss on sale for retirement3,870.00Net gain$62,706.00Gain as reported15,292.22Increase in capital gain$47,413.78The parties are now in agreement that under section 214 of the Revenue Act of 1939 petitioner's adjusted basis of the 600 shares of Coca-Cola*922  International Corporation class A stock, instead of zero as shown in the respondent's determination above, is the amount of $13,017.97, which is the amount petitioner reported on his return.  In a statement attached to the deficiency notice the respondent said in part: *9  Under the provisions of an agreement dated October 28 [sic], 1935, with The Equitable Company, Atlanta, Georgia, 600 shares of the Class A stock of the Coca Cola International Corporation were surrendered in exchange for 1200 shares of Class A stock of The Coca Cola Company.  On December 6, 1935, the 1200 shares of Class A stock of The Coca Cola Company received in the exchange were sold to that company also under the provisions of the agreement of October 28 [sic], 1935, and by it retired.  Upon this retirement there was received a price of $52.50 per share, plus a dividend of $1.30 per share.  [Note: October 28 should be October 8.] The 600 shares of Class A stock of the Coca Cola International Corporation were received as a stock dividend on common stock of that company in January, 1929.  * * * The exchange described above is held to represent a distribution in partial liquidation*923  of Coca Cola International Corporation.  Under the provisions of section 115(c) of the Revenue Act of 1934, and article 115-5 of regulations 86, the limitations imposed by section 117(a) of the Revenue Act of 1934 are not applicable to the gain realized upon the exchange, and 100% thereof is subject to taxation.  Petitioner by appropriate assignments of error assails the correctness of this determination by the respondent and contends that the disposition of the 600 shares of Coca-Cola International Corporation class A stock in 1935 was a "sale" thereof to the Coca-Cola Co. as that term is used in section 112(a) of the Revenue Act of 1934; that there was no distribution in partial liquidation to petitioner by either the Coca-Cola Co. or by the Coca-Cola International Corporation as the term "amounts distributed in partial liquidation" is used in section 115(c) of the Revenue Act of 1934; and that only the percentages mentioned in section 117(a) of the Revenue Act of 1934 of the gain should be taken into account, dependent upon the length of time that petitioner had held the said 600 shares of Coca-cola International Corporation class A stock.  FINDINGS OF FACT.  Petitioner is*924  an individual residing at Atlanta, Georgia.  His income tax return for the year 1935 was filed with the collector of internal revenue for the district of Georgia.  "The Coca-Cola Company" (herein sometimes referred to as Coca-Cola), is a Delaware corporation whose principal place of business is at Atlanta, Georgia.  The business of Coca-Cola first started in a small way about 1888 in the city of Atlanta, Georgia.  It was incorporated shortly thereafter under the name of "Coca-Cola Company", a Georgia corporation, with an authorized capital stock of 500 shares with a par value of $100 each.  "The Coca-Cola Company" was formed on September 5, 1919, under the laws of the State of Delaware, with an authorized capital stock of 500,000 shares of no par value common and 100,000 shares of $100 par value 7 percent preferred.  The common shares were sold for cash.  On September 11, *10  1919, "The Coca-Cola Company" acquired all the properties of "Coca-Cola Company" for a purchase price consisting of $15,000,000 cash and $10,000,000 of 7 percent preferred stock.  "Coca-Cola International Corporation" (herein sometimes referred to as International) was organized on November 18, 1922, under*925  the laws of the State of Delaware, with an authorized capital stock of 251,000 shares of no par value common stock, as a holding corporation to carry on the function of a preexisting voting trust among the majority stockholders of Coca-Cola.  At the time of organization it issued one share of its own capital stock for each share of Coca-Cola common stock transferred to it until it held 251,000 of the 500,000 shares of Coca-Cola common stock then outstanding.  During 1925 and 1929, $4,000,000 and $6,000,000, respectively, of the 7 percent preferred stock of Coca-Cola was retired, leaving only the common stock outstanding.  On March 3, 1927, Coca-Cola amended its charter and issued a 100 percent stock dividend in common stock, so that there were then outstanding 1,000,000 shares of common stock of no par value, and none other.  On December 8, 1928, Coca-Cola amended its charter to authorize the issuance of 1,000,000 shares of $3 cumulative class A stock and directed that this stock be distributed to the stockholders of record as of January 15, 1929.  As of January 15, 1929, Coca-Cola, pursuant to the foregoing, issued a stock dividend consisting of one share of the $3 cumulative*926  class A stock for each share of the common then outstanding, so that the capital structure then stood, authorized and issued, 1,000,000 shares of common stock of no par value and 1,000,000 shares of class A stock redeemable at $52.50 per share, plus accrued dividends, through call by lot or purchase as a whole or in part on any dividend-paying date on 30 days' notice, as provided for in the certificate of incorporation as amended.  Both common and preferred at all times material were listed on the New York Stock Exchange.  As of January 1, 1934, Coca-Cola had outstanding 1,000,000 shares of class A stock.  On November 9, 1934, it received as a distribution in kind from its wholly owned subsidiary, the Rohawa Co., 200,000 shares of class A stock, which were forthwith retired, and a certificate to that effect was filed with the Secretary of State of Delaware on November 26, 1934, leaving 800,000 shares outstanding on December 31, 1934.  In the minutes of Coca-Cola dated August 31, 1935, the desire to reduce the outstanding class A stock by 200,000 shares to 600,000 shares was expressed as follows: RESOLVED, That, pursuant to the recommendation of the Executive Committee with respect*927  to the call of Class "A" stock, the officers of the Company are directed to prepare with advice of counsel, and to present to the Board, a plan of procedure and appropriate resolutions in harmony with the charter and *11  by-laws of the Company whereby outstanding shares of Class "A" stock may be called in number sufficient to reduce the remaining outstanding shares of such stock to 600,000.  During the calendar year 1935 Coca-Cola acquired and retired 200,000 shares of its class A stock as follows: Shares1.  On June 27, 1935, as result of letter dated May 22, 19354252.  As a dividend in kind from its wholly owned subsidiary, the Coca-Cola Co. of Canada, Ltd., on September 20, 19353,3003.  As a dividend in kind from its wholly owned subsidiary, the Rohawa Co. on November 4, 1935124,5204.  Stock referred to in contract with the Equitable Co. dated November 2, 1935, as hereinafter set forth, on November 27, 193571,755Total200,000On November 4, 1935, the board of directors of Coca-Cola adopted certain resolutions which are recorded in the minutes as follows: On Motion duly made and seconded, the following resolution was unanimously*928  adopted: WHEREAS, The Coca-Cola Company now owns 128,245 [see items 1, 2 and 3 in preceding paragraph] shares of its Class "A" stock, which it holds as Treasury Stock; and WHEREAS, it is deemed desirable and in the best interests of the corporation to retire said 128,245 shares of Class "A" stock; Now, Therefore, Be It Resolved, That the corporation hereby retires 128,245 shares of its Class "A" stock now owned by it and held as Treasury stock; and Be It Further Resolved, That the officers of the corporation be and they are hereby authorized to take any and all steps required to be taken by law, as a result of the retirement hereby effected.  On motion duly made and seconded, the following resolution was unanimously adopted: RESOLVED, That all previous resolutions of this Board and of the Executive Committee, authorizing the purchase or call of this Company's Class "A" stock be and are hereby rescinded. On motion duly made and seconded, the following resolution was unanimously adoped: WHEREAS, It is deemed desirable and in the best interests of the corporation that it purchase out of its surplus not in excess of 71,755 shares of the Class "A" stock of the corporation, *929  now offered for sale to this corporation by The Equitable Company, and that immediately following the purchase of said shares, this corporation retire such shares.  Be It Resolved, That the executive officers of The Coca-Cola Company be and they hereby are empowered and directed to purchase out of the surplus of the corporation from The Equitable Company not in excess of 71,755 shares of Class "A" stock of The Coca-Cola Company at $52.50 per share; plus amount equal to accrued dividends to date of payment, and, Be It Further Resolved, That payment for the shares so purchased be made in cash, and Be It Further Resolved, That immediately following the purchase of said shares by the Coca-Cola Company, such shares forthwith shall be retired by the corporation pursuant to this resolution without further action by the Board of Directors, it being the intention of the Board that this resolution shall not only authorize the purchase of said shares from The Equitable Company, but *12  also effect the retirement of such shares as shall be purchased pursuant hereto; and Be It Further Resolved, That the officers of the corporation be and they hereby are authorized to take any and*930  all steps required to be taken by law as a result of the retirement hereby effected.  On February 9, 1926, the board of directors of International held a special meeting and adopted an irrevocable resolution whereby its stockholders might at any time exchange their shares, plus a small exchange fee, for the same number of shares of Coca-Cola.  On February 13, 1926, the stockholders of International held a special meeting and unanimously adopted the following resolution: BE IT RESOLVED, That pursuant to the provisions of the resolutions so adopted by the Board of Directors and this day ratified, approved, confirmed and adopted by the Stockholders, the capital stock of this Company be and hereby is reduced to the extent that shares of stock of this Corporation may be exchanged for shares of stock of The Coca-Cola Company, as provided in said resolution; and as such reduction is accomplished by such exchange of shares the shares so exchanged and as exchanged, hereby are retired until all of the Common Capital Stock of the Company, if exchanged, has been so retired.  Pursuant to the above resolutions of February 9 and 13, respectively, International, on March 20, 1926, filed with*931  the office of Secretary of State of the State of Delaware a "Certificate of Amendment of Certificate of Incorporation" which, after setting out in full such resolutions, stated: That the provisions of the Laws of the State of Delaware relating to the reduction of the capital stock of a corporation organized under its laws were in all other respects fully complied with, including the payment of all the Corporation's debts not otherwise fully secured, and the reduction of the capital stock is accomplished as provided for in such resolutions.  When Coca-Cola issued the common stock dividend on March 3, 1927, International received 243,355 shares of Coca-Cola common stock.  International did not make any corresponding increase in its own outstanding capital, but thereafter, by appropriate action taken on the part of International, one share of International common could be turned in to the corporation for two shares of Coca-Cola common.  When Coca-Cola amended its charter so as to authorize the issuance of 1,000,000 shares of $3 cumulative class A stock to be distributed to its stockholders of record January 15, 1929, International received 457,712 shares thereof as its proportionate*932  amount.  Pursuant to authorizations of its directors and stockholders at a special meeting of the latter held on December 18, 1928, International, on December 29, 1928, filed with the office of Secretary of State of the State of Delaware a "Certificate of Amendment of Certificate of Incorporation" whereby article four the of original certificate of incorporation was stricken and a new article fourth substituted *13  therefor, the purpose being to authorize in addition to the common stock outstanding the same number of shares of a "special stock to be designated and know as Class A stock." This class A stock was nonvoting, except upon default of dividends; was to pay yearly dividends at the rate of $6 per share; and at the option of the board of directors was "subject to call or redemption on any dividend-paying date after date of issue, at the price of One Hundred and Five ($105.00) Dollars per share, plus dividends accumulated and unpaid thereon, upon such notice and in such manner as may be provided by the Board of Directors in its sole discretion and in accordance with law." On December 18, 1928, the directors of International held a meeting and adopted certain resolutions, *933  in part, as follows: NOW, THEREFORE, BE IT RESOLVED FIRST: That a stock dividend be and hereby is declared by this Company and that there be distributed to the holder of each outstanding share of common stock of this Corporation the same number of shares of Class A stock as he holds of such common stock, to bear date as of January 1, 1929, to be issued to stockholders of record on January 18, 1929, and to be determined by the number of shares of common stock on that date outstanding.  * * * FIFTH: The Class A stock of this Company being subject to call, the method of making such call is hereby fixed as follows: The number of each outstanding certificate, as shown by the records of the Corporation, at the time of the call, shall be placed in a container, and a person designated by the Board of the call, shall draw one number at a time until the number of shares equal to the number to be called shall be drawn.  If a greater number of shares shall be so drawn than have been designated for call, then to equalize same, said excess number of shares shall be deducted from the last numbered certificate drawn; a new certificate to be issued for the number of shares in excess to the holder*934  of said certificate.  Pursuant to the above resolutions of December 18, 1928, the class A stock referred to therein was issued to the International stockholders of record as of January 18, 1929.  After the payment of the stock dividend in class A stock by Coca-Cola, International held as assets two shares of Coca-Cola common for each share of its own common outstanding, and two shares of Coca-Cola class A stock for each share of its own class A stock outstanding.  On February 5, 1929, the directors of International passed a resolution, the material provisions of which are as follows: WHEREAS, this Company has recently received from The Coca-Cola Company a stock dividend composed of 457,712 shares of The Coca-Cola Company Class "A" Stock, being double the number of shares in Class "A" Stock that this Company now has outstanding of Common Stock; and, WHEREAS, pursuant to actions of this Company heretofore taken relative to the exchange of the capital stock of this Company for stock of The Coca-Cola Company owned by this Company, it is desirable that the same apply equally *14  to an exchange of the Class "A" Stock of this Company for Class "A" Stock of the Coca-Cola Company. *935  BE IT THEREFORE RESOLVED, FIRST: That upon the presentation of any share of Class "A" Stock of this Company be the holder thereof, properly endorsed, plus nineteen (19??) cents per share, if exchanged in New York City, and fifteen (15??) cents per share if exchanged in Atlanta, Georgia, to cover all expenses incurred or required, including governmental taxes, the Officers of this Company are directed, upon the request of such holder, to deliver to him, properly endorsed, two shares of the Class "A" Stock of The Coca-Cola Company from the shares of such stock of that Company now held by this Corporation.  * * * THIRD: That all such shares of this Company received in exchange shall be cancelled and retired.  The provisions of the above resolution of February 5, 1929, relative to the ratio of delivery of Coca-Cola class A shares for International class A shares continued at all times from 1929 through the taxable year 1935 and still continues.  When International declared the class A stock dividend, petitioner was then the owner of 600 shares of International common, and by reason thereof he received 600 shares of International class A stock.  On October 8, 1935, petitioner*936  entered into an agreement with "The Equitable Company" (herein sometimes referred to as Equitable), the material provisions of which are as follows: The undersigned (Owner) and The Equitable Company (Agent) agree: 1.  The Owner hereby deposits, or will promptly deposit, with the Agent, or with some Bank or Trust Company approved by the Advisers, 1200 shares of Class "A" Stock of The Coca-Cola Company, to be held subject to the terms hereof.  * * * 3.  The Owner authorizes the Agent to sell to The Coca-Cola Company, for the Owner's account, on or before December 12, 1935, 1200 shares of Coca-Cola Class "A" Stock at Fifty-two and 50/100 ($52.50) Dollars a share, plus accrued dividends.  * * * 4.  This agreement shall terminate on December 12, 1935, or at such earlier time as the Agent may have sold to The Coca-Cola Company, for the Owner, the number of shares which the Agent is authorized to sell for the Owner's account to The Coca-Cola Company.  5.  Within ten (10) days from the termination of this agreement, the Agent will settle with the Owner for the sale made, and will deliver unsold shares and all moneys owing the Owner, less the amount which the Advisers shall determine*937  and approve for the Agent's fees and all other expenses incurred in carrying out the terms of this agreement.  6.  For the purposes of this agreememt, one (1) share of Coca-Cola International Corporation Class "A" stock and the exchange fee will be considered as the equivalent to two (2) shares of Coca-Cola Company Class "A" stock.  7.  The Owner hereby ratifies and confirms all acts of the Agent and of said Advisers, and neither the Agent nor the Advisers shall be liable to the Owner for any act taken pursuant to the terms of this agreement except for a wilful tort or for an act done in the absence of good faith.  *15  8.  All action taken and purchases made by the Agent under this agreement shall be subject to the approval of the Advisers, who shall be * * *.  * * * This 8th day of Oct. 1935.  THE EQUITABLE COMPANY, By J. A. BROWN GUS T. DODD Pursuant to paragraph 6 of the above contract of October 8, 1935, petitioner, on October 30, 1935, deposited the aforementioned 600 shares of International class A stock with the Trust Co. of Georgia, as escrow agent, and received a receipt therefor which stated in part that "as requested, we will hold this stock subject*938  to instructions of The Equitable Company." On November 2, 1935, Equitable submitted an offer to Coca-Cola, which offer (accepted by Coca-Cola) was in part as follows: The undersigned hereby offers to sell to you for retirement Seventy-one Thousand Seven Hundred Fifty-five (71,755) shares of Class "A" stock of The Coca-Cola Company upon the following terms and conditions, to-wit: (1) We have delivered endorsed certificates representing 38,795 shares of such Class "A" stock to the Trust Company of Georgia, as Escrow Agent, and submit herewith an original of the Escrow Agreement between ourselves and the Trust Company of Georgia, dated November 2, 1935.  (2) On or before November 23, 1935 we agree to deposit with said Escrow Agent, under the Escrow Agreement, 32,960 shares of the Class "A" stock of The Coca-Cola Company.  (3) We have instructed the Escrow Agent to deliver the Certificates representing said 71,755 shares of Class "A" stock of The Coca-Cola Company to you on December 6, 1935.  * * * (4) Upon delivery of such Certificates to you, you are to pay to the Escrow Agent Fifty-two Dollars and Fifty Cents ($52.50) per share, plus accrued dividends to date of delivery, *939  i.e. $52.50 per share, plus $1.30 for dividends accrued to December 6, 1935.  * * * (6) Title to the shares to be sold and delivered hereunder shall not pass to the purchaser until the date the shares are delivered by the Escrow Agent to the purchaser.  On November 2, 1935, Equitable also made an agreement with the Trust Co. of Georgia the material provisions of which are as follows: The undersigned, The Equitable Company, hereby deposits with you [Trust Company of Georgia] 18,845 shares of the Class "A" stock of The Coca-Cola Company and 9,975 shares of the Class "A" stock of The Coca-Cola International Corporation.  This is deposited with you in accordance with the terms of an offer to sell Coca-Cola Class "A" stock to The Coca-Cola Company, a copy of which is attached hereto and made a part hereof.  On or before November 23rd, 1935, we will deliver to you additional shares of such stock so that the total on deposit with you will equal 71,755 shares of Coca-Cola Class "A" stock.  Prior to December 6th, 1935 you will cause the Class "A" International stock to be converted into Class "A" of The Coca-Cola Company, billing us for the expense, including the exchange fee.  On*940  December 6th, 1935 you will deliver the said shares to The Coca-Cola Company upon payment to you of the purchase price mentioned in the attached contract.  *16  If the Coca-Cola Company should fail to comply with the terms of the contract to purchase the said Class "A" shares shall be returned to us.  The Trust Co. of Georgia acknowledged receipt of the above mentioned shares and agreed to act in accordance with the specified directions.  On or about the same day it transmitted a copy of the said agreement between it and Equitable to Coca-Cola and, among other things in the letter of transmittal, said: * * * The shares therein mentioned have been delivered to us and we shall hold and dispose of them in accordance with the terms of said agreement.  Among the shares of International class A referred to in the above agreement between Equitable and the Trust Co. of Georgia as being deposited with the latter for the former were petitioner's 600 shares here in question.  On November 27, 1935, the secretary and treasurer of Coca-Cola sent a letter to the Trust Co. of Georgia, the body of which is as follows: There will be delivered to you in the next few days, as escrow*941  agent, a deposit of money in sufficient amount to cover purchase price, by us, of 71,755 shares of Coca-Cola Class "A" stock at $52.50 per share plus $1.30 per share representing accrued dividend to December 6, 1935.  This is in accordance with our agreement to purchase entered into with the Equitable Company under date of November 2, 1935.  As provided in our agreement with the Equitable Company, you are authorized to disburse these funds against delivery of the certificates of stock aggregating 71,755 shares; such certificates to be properly endorsed to this Company and technically in negotiable form for retirement.  You are hereby requested to comply with the exact terms of our contract.  On or about the same day, Coca-Cola sent to the Trust Co. of Georgia a check for $3,860,419, as representing the "deposit of money" referred to in the first paragraph of the above mentioned letter dated November 27, 1935.  On November 30, 1935, the Trust Co. of Georgia sent a letter to the secretary and treasurer of Coca-Cola, the material part of which is as follows: We acknowledge and thank you for your letter of November 27.  We have received a check for $3,860,419.00 and as requested, *942  we will disburse this amount in accordance with the terms of your contract with The Equitable Company for the purchase of 71,755 shares of Class "A" stock of yourCompany.  * * * We, of course, will have the Class "A" stock of Coca-Cola International Corporation exchanged for 25,575 [later changed to 25,232] shares of Class "A" stock of The Coca-Cola Company, but before doing so, we will appreciate your letting us know what disposition you wish us to make of the 71,755 shares of stock.  As escrow agent the Trust Co. of Georgia, prior to December 6, 1935, received a total of 46,523 shares of Coca-Cola class A stock, including the 1,000 shares in question in the case of L. B. Coley,*17  Docket No. 99322 (), and prior to December 3, 1935, it received a total of 12,616 shares of International class A stock, including the 600 shares in question in the instant case.  On or about December 3, 1935, it delivered the 12,616 shares to International's authorized transfer agent, the Guaranty Trust Co. of New York City, for retirement and in exchange for 25,232 shares of Coca-Cola class A stock, and on December 6, 1935, it delivered to Coca-Cola for retirement*943  all of the 46,523 and 25,232 (total 71,755) shares of Coca-Cola class A stock.  The Trust Co. of Georgia disbursed the $3,860,419 in accordance with the instructions it received from Coca-Cola in the above mentioned letter dated November 27, 1935.  On December 9, 1935, it issued its check to petitioner for the amount of $64,266, with the following notations thereon: The above described check was issued in payment of the following items: 600 shs. Coca-Cola Int. Class A Stock at 105$63,000.00Accrued dividends thereon to 12/6/351,560.00Less: Cost of exchanging stock for Coca-Cola stock 19?? per sh$114.00Less Handling charges at 30?? per sh180.00Net64,266.00This check is forwarded you at instructions of The Equitable Co. in payment of the stock described.  On the back of each of the six certificates covering the 600 shares of International class A stock here in question was an assignment by petitioner as follows: FOR VALUE RECEIVED hereby sell, assign, and transfer unto THE COCA COLA INT. CORP. FOR RETIREMENT shares of the capital stock represented by the within certificate and do hereby irrevocably constitute and appoint attorney to*944  transfer the said stock on the books of the within-named Corporation with full power of substitution in the premises.  Dated [Signed] GUS T. DODD In presence of [Signed] Alvin Moore At the time petitioner deposited the 600 shares International class A stock with the Trust Co. of Georgia as escrow agent he signed the shares in blank.  The words "THE COCA COLA INT. CORP. FOR RETIREMENT" were later inserted by the Trust Co. of Georgia without discussing it with petitioner Dodd.  All of the International class A shares were handled in the same way.  At no time since the organization of International has the number of its outstanding shares of common stock exceeded 251,000 shares, and since 1926 there has been a gradual decrease in the number of shares outstanding without the reissuance of any shares, so that at the end of the year 1935 the number of outstanding shares of common stock had decreased to 198,150.  *18  Since the original issue of International class A stock in the amount of 228,856 shares in 1929, there has never been any increase in the number of outstanding shares, but rather the number of shares has been gradually decreased so that at the beginning*945  of 1935 there were only 113,233 shares outstanding, and at the end of 1935 there were but 97,690 shares outstanding.  Pursuant to authorization of its directors, International, on January 5, 1935, filed with the office of Secretary of State of the State of Delaware a "Certificate of Amendment of Certificate of Incorporation" which, among other things, provided: That at a meeting of the Board of Directors of said Coca-Cola International Corporation duly held and convened, it was resolved to amend the Certificate of Incorporation of the said Coca-Cola International Corporation in the following respects, to-wit: * * * Second, by striking out the first paragraph of Article Fourth of the Certificate of Incorporation, as found in the amendment to the Certificate of Incorporation of the twenty-ninth day of December, 1928, and substituting therefor the following: FOURTH: The authorized capital stock of the corporation shall consist of 203,009 shares of Common Stock and 113,619 shares of Class A Stock, all of such shares of both the Common and Class A Stocks being without par value.  The number of shares with which the corporation shall begin business shall be ten (10) shares of Common*946  Stock without par value.  From time to time the corporation may acquire by purchase, gift or otherwise, any of the shares of either its Class A or Common Stock; and upon such acquisition by the corporation of any of its own shares, such shares shall not be reissued but shall be permanently retired.  No amendment or certificate affecting International's charter or its outstanding stock has been filed with the Secretary of State of Delaware since the above mentioned amendment filed on January 5, 1935.  Prior to signing the agreement with Equitable dated October 8, 1935, petitioner on a certain day had certain conversations relative to selling the 600 shares of International class A stock here in question with one Walter Brown, who was secretary to Ernest Woodruff, one of the three "Advisers." The other two advisers were C. Howard Candler and Thomas K. Clenn.  Petitioner told Brown he would not decide that day but wanted a little time to study it over.  He went back to his office and talked with his auditor and asked him to determine the amount of income tax he would have to pay if he disposed of the said 600 shares.  After the auditor computed what he thought would be the tax, petitioner*947  had the auditor consult with the internal revenue officials, whose computation at that time agreed with that of petitioner's auditor.  Petitioner then signed the contract with Equitable.  At the time petitioner signed the contract he did not *19  read the entire instrument and he was not told that his 600 shares would be exchanged with International for 1,200 shares of Coca-Cola class A stock.  During the year 1935 Dameron Black was vice president and secretary-treasurer of the Trust Co. of Georgia.  He supervised the transaction whereby the 71,755 shares of Coca-Cola class A stock were delivered to that company for retirement.  Petitioner did not have any contacts with the Trust Co. of Georgia from the time the 600 shares in question were delivered to it and the time such shares were forwarded to International for exchange and retirement.  John E. McClure is an attorney at law, with offices in Washington, D.C.  He primarily represented the group of stockholders who devised the plan to deliver 71,755 shares of Coca-Cola class A stock to that company for retirement.  The three above named advisers were the principal movers in the plan.  The question of exchanging International*948  class A stock with International for Coca-Cola class A stock first became a subject of discussion about two days before the contract between Equitable and Coca-Cola dated November 2, 1935.  The representatives of Coca-Cola told McClure that they would buy nothing but Coca-Cola class A stock and that definitely they would not buy International class A stock.  Any part of the stipulation of facts, including the exhibits thereto, not specifically set forth herein is incorporated herein by reference and made a part of these findings of fact.  OPINION.  BLACK: The principal difference between the instant proceeding and the case of , is that during the taxable year 1935 Coley was a direct stockholder of Coca-Cola, whereas petitioner Dodd was a stockholder of International, which in turn was a stockholder of Coca-Cola.  Both Coley and Dodd were parties to the same plan under which Coca-Cola during 1935 desired to obtain and did obtain for retirement a balance of 71,755 shares of its class A stock at the redemption price of $52.50 per share plus $1.30 per share for accrued dividends.  Coley, being a direct stockholder of Coca-Cola, participated*949  in the plan by delivering 1,000 shares of class A stock of Coca-Cola to Equitable, as agent, which in turn delivered the shares to the Trust Co. of Georgia as escrow agent, which in turn delivered the shares (as a part of the 71,755 shares) to Coca-Cola for retirement and for cash, which cash the escrow agent then paid over to Coley.  In our report in the Coley case, we held that the cash thus received by Coley was an amount distributed in partial liquidation of a corporation as the term "amounts distributed in partial liquidation" is used in section 115(c) and defined in section 115(i) of the *20  Revenue Act of 1934, and that there should be taken into account in computing Coley's net income 100 percent of Coley's gain in the transaction.  Dodd, being a stockholder of International, participated in the plan by delivering 600 shares of class A stock of International direct to the Trust Co. of Georgia as escrow agent, who in turn delivered the shares to International for retirement and in exchange for 1,200 shares of class A stock of Coca-Cola, which 1,200 shares (as a part of the 71,755 shares) the escrow agent then delivered to Coca-Cola for cash, which cash the escrow*950  agent then paid over to Dodd.  The question involved in the present case is whether the gain Dodd realized from participating in the plan should be taxed any differently than the gain Coley realized from participating in the plan.  The parties are in agreement as to the amount of the gain, since they have now agreed upon the cost basis, but differ only as to the percentage thereof to be taken into account in computing net income.  Petitioner contends that the amount he received from the escrow agent was merely the consideration for a "sale" by him of his 600 shares of International class A stock and that he is entitled to the benefits of section 117(a) of the Revenue Act of 1934, whereas the respondent contends that the amount so received represents "amounts distributed in partial liquidation" as that term is used in section 115(c) and defined in section 115(i) of the Revenue Act of 1934, so that as provided in section 115(c) "Despite the provisions of section 117(a), 100 per centum of the gain so recognized shall be taken into account in computing net income." These sections of the statute are printed in the margin of the Coley case and need not be repeated here.  Petitioner*951  in support of his contention argues that he actually sold the 600 shares of International stock and not the 1,200 shares of Coca-Cola stock; that neither Equitable nor any other person or corporation was empowered by petitioner to exchange petitioner's International stock for Coca-Cola stock; that the petitioner can not be held accountable for the exchange which was made; and that, if petitioner is legally responsible for the exchange, then the exchange was an intermediate and transitory transaction, and the taxable transaction would be the net result, namely, a sale by petitioner of his 600 shares of International class A stock for cash from Coca-Cola.  Petitioner has requested the Board to find the facts as stipulated and also to make four additional findings as follows: 1.  The Taxpayer disposed of his 600 shares of Coca-Cola International Class A upon a sale thereof as the term "sale" is used in Section 112(a) of the Revenue Act of 1934.  2.  The act of the Trust Company of Georgia, The Equitable Company, or The Coca-Cola Company in having Taxpayer's 600 shares of Coca-Cola International A exchanged for 1200 shares of Coca-Cola Company class A was not authorized by the Taxpayer, *952  nor is it to be attributed to the Taxpayer.  *21  3.  If such exchange is, for tax purposes, attributable to Petitioner, it was merely a transitory transaction carried through to effectuate the ultimate objective of selling Petitioner's stock for cash, and the exchange is not in and of itself a separate, independent taxable transaction, but is one step only in an entire transaction wherein taxpayer sold his Coca-Cola International A for cash.  4.  The Petitioner is entitled to the benefit of the Capital Gains Section.  We found the facts as stipulated, but we are unable to make the special findings requested by petitioner, for reasons which we shall presently state.  The primary question for determination in our opinion is, For whom did the Trust Co. of Georgia act when it delivered the 12,616 shares (including the 600 shares here in question) of International class A to International's transfer agent for retirement and in exchange for 25,232 shares of Coca-Cola class A stock?  Petitioner contends that the Trust Co. of Georgia was acting for the account of Coca-Cola, whereas the respondent contends that it was acting for petitioner's account.  From an examination of the*953  facts set out in our findings, we hold that the respondent's contention must prevail.  In order to reach a decision on the issue involved in this case a careful analysis of the facts must be made.  We have endeavored to make such an analysis.  A very important document to consider, of course, is the contract which was signed on October 8, 1935, between petitioner Dodd, as owner, and the Equitable Co., as agent.  Clause 3 of that contract reads in part as follows: 3.  The Owner authorizes the Agent to sell to The Coca-Cola Company, for the Owner's account, on or before December 12, 1935, 1200 shares of Coca-Cola Class "A" Stock at Fifty-two and 50/100 ($52.50) Dollars a share, plus accrued dividends.  * * * If that had been the only clause of the contract which described and controlled the kind of stock which was to be sold and delivered, it seems to us that the inevitable result of the whole series of transactions in the instant case would come out the same as in the Coley case.  The petitioner concedes in his brief that this would be true.  But petitioner points to clause 6 of the contract, which reads as follows: 6.  For the purposes of this agreement, one (1) share of*954  Coca-Cola International Corporation Class "A" stock and the exchange fee will be considered as the equivalent to two (2) shares of Coca-Cola Company Class "A" stock.  After quoting this clause of the contract and pointing out that it was under it that petitioner deposited his 600 shares International class A stock with the Trust Co. of Georgia for subsequent sale and delivery to Coca-Cola, petitioner says in his brief: * * * This can mean nothing less than that Mr. Dodd signed a contract under which he had the option of delivering either 600 shares of International A or 1200 shares of Coca-Cola A, and he elected to take the former.  As Mr. Dodd Complied with the terms of the contract in delivering 600 shares International *22  A, then there can be no implied authority in any one to exchange the 600 shares of International A for 1200 shares of Coca-Cola A, and the Taxpayer had done everything that he agreed to do in his contract.  * * * From this premise petitioner argues that if the transaction, in so far as petitioner was a party to it as actually carried out, was a purchase by Coca-Cola of International A, from petitioner, the investigation comes to an end in favor of*955  the taxpayer.  We agree to the soundness of this latter proposition if the facts are as therein stated.  But we think petitioner errs in his construction of the facts.  There can be no doubt, we think, that a group of stockholders of Coca-Cola and of International started out with the purpose in view of avoiding a call for redemption by Coca-Cola of a part of its class A stock.  They were, of course, well within their legal rights to do this.  In order to accomplish this purpose they drew up a contract with Equitable as their agent.  This contract contemplated that either Coca-Cola class A stock or International class A stock would be deposited under the contract, and that Equitable would sell and deliver to Coca-Cola both classes of the stock.  There can be no doubt, we think, that, when petitioner Dodd signed the contract with Equitable and later deposited his 600 shares International A stock with the Trust Co. of Georgia, he fully expected that these identical shares would be sold and delivered to Coca-Cola.  He so testified at the hearing and we have no reason to doubt his testimony.  However, at that particular time Coca-Cola had not agreed to purchase any shares of stock either*956  of Coca-Cola class A stock or of International class A stock.  What Coca-Cola had under consideration was a call for redemption of a certain number of shares of its class A stock After certain stockholders of Coca-Cola and International, including petitioner, had signed the agreement with Equitable as agent, and had assembled blocks of both classes of stock for sale, one of the attorneys representing the interested stockholders and Equitable attended a directors' meeting of Coca-Cola held in Wilmington, Delaware.  This was on or about November 1, 1935.  The attorney took along with him the contracts authorizing Equitable to sell to Coca-Cola both stocks, namely Coca-Cola class A stock and International class A stock.  The board of directors, acting for Coca-Cola, refused to buy any International class A stock.  The attorney described the situation in his testimony as follows: * * * Well, I went ahead with the matter and drew up these contracts for them and took them up there, and we offered to sell to the Coca-Cola Company, by contract of sale, so many shares of Coca-Cola and so many shares of International, and I did not have quite the number, and they would not accept the contract, *957  they said they were going to buy nothing but Coca-Cola.  * * * * * * It was our intention, as you see, to sell International to the Coca-Cola Company, and it was on this trip, about the first of November, when I was in Wilmington, that they told us definitely they would not buy International * * *.  Following *23  this refusal of Coca-Cola to buy International A stock, on November 2, 1935, Equitable and Coca-Cola entered into the agreement, incorporated in our findings of fact, relative to the 71,755 shares of Coca-Cola A in which nothing was said about International A, and in which it was provided that "Title to the shares to be sold and delivered hereunder shall not pass to the purchaser until the date the shares are delivered by the Escrow Agent to the purchaser." On the same day, November 2, 1935, Equitable entered into an agreement with the Trust Co. of Georgia which provided in part that: Prior to December 6th, 1935 you [Trust Company of Georgia] will cause the Class "A" International stock to be converted into Class "A" of The Coca-Cola Company, billing us for the expense, including the exchange fee.  On December 6th, 1935 you will deliver the said shares to The*958 Coca-Cola Company upon payment to you of the purchase price mentioned in the attached contract.  Thereafter, the Trust Co. of Georgia delivered the International A to International's authorized transfer agent for retirement and in exchange for double the number of shares of Coca-Cola A which it then delivered to Coca-Cola as a part of the 71,755 shares mentioned in the agreement between that company and Equitable dated November 2 1935.  On December 9, 1935, it issued its check to petitioner, stating it to be in payment for 600 shares of International A at $105 less "Cost of exchanging stock for Coca-Cola stock 19?? per sh. $114.00." Petitioner accepted the check.  From these facts we think there can be no doubt that when the Trust Co. of Georgia delivered International A to International's authorized transfer agent for retirement and in exchange for double the shares of Coca-Cola A, it definitely was not acting for the account of Coca-Cola, which had expressly refused to purchase any International A stock, but was acting for Equitable, which was petitioner's agent.  We hold, therefore, that the exchange is accountable to petitioner.  Petitioner contends that the contract of October 8, 1935, which*959  he signed with Equitable was not broad enough to authorize Equitable to exchange the 600 shares International class A stock which he deposited for 1,200 shares Coca-Cola class A stock and then sell the 1,200 shares Coca-Cola class A stock to Coca-Cola for his account.  We think differently.  Clause 7 of the contract of October 8, 1935, which petitioner signed with Equitable, reads: 7.  The Owner hereby ratifies and confirms all acts of the Agent and of said Advisers, and neither the Agent nor the Advisers shall be liable to the Owner for any act taken pursuant to the terms of this agreement except for a wilful tort or for an act done in the absence of good faith.  We think this clause of the contract is sufficient to give Equitable the authority to make the exchange and sale in question for petitioner's account and that he is bound thereby.  We so hold.  *24  The respondent determined the deficiency on the basis of two separate transactions, namely, (1) an exchange of the 600 shares of International A for 1,200 shares of Coca-Cola A, resulting in a gain of $66,576, and (2) a sale of the 1,200 shares of Coca-Cola A, resulting in a loss of $3,870.  As a result of the stipulation*960  that petitioner's cost basis of the 600 shares is $13,017.97, the respondent concedes that the gain from the exchange is $53,558.03 and that the net gain from both transactions is that amount less $3,870 or $49,688.03, instead of the $62,706 determined in his deficiency notice.  Petitioner contends that, should be Board hold, as we have above, that petitioner must be regarded as having exchanged his International A for Coca-Cola A, then the transaction must be viewed as a whole; and that the separate steps in a single transaction can not be regarded as separate transactions.  But in order to do this petitioner argues that we must "disregard the transitory exchange of the International stock for Coca-Cola stock and regard the transaction in its true light, namely, that the Taxpayer sold his International stock for cash." In support of this contention petitioner cites ; ; ; *961 ; ; ; ; ; ; and . In the instant proceeding it will not, in our opinion, make any difference in the result of petitioner's tax liability whether it be determined on the basis of a single transaction with several steps viewed as a whole, or whether it be determined on the basis of two separate transactions.  If petitioner's tax liability be determined on the basis of two separate transactions, as the respondent has done, the gain on the first transaction, namely, on the exchange of 600 shares of International A for 1,200 shares of Coca-Cola A is the amount of $53,558.03.  Since the 600 shares were retired, this transaction would be regarded as a distribution in partial liquidation of International*962  under the decisions of ; petition for review denied, ; rehearing denied, April 20, 1935, and , and under the principles enunciated in L. B. Coley, supra, 100 percent of such gain, would be taken into account in computing petitioner's net income.  The second transaction, namely, the sale of the 1,200 shares of Coca-Cola A to Coca-Cola for retirement would be on all fours with the transaction involved *25  in the Coley case, except that here petitioner would have a loss of $3,870 instead of a gain, and under section 117(a) and (d) of the Revenue Act of 1934, all of this loss would be allowed.  The net result of the two transactions, therefore, would be a $49,688.03 gain, 100 percent of which would be taken into account in computing petitioner's net income.  This method it seems to us is treating the transaction as a whole and the respondent has arrived at the correct tax consequences thereof.  Of course if we could treat as petitioner's only part of the transaction his delivery of the 600 shares of International class A*963  stock to the Trust Co. of Georgia for sale to Coca-Cola, and that all steps thereafter were taken for Coca-Cola and not for petitioner Dodd, we would hold that petitioner had simply made a sale of his International A stock to Coca-Cola and would be accountable for the gain thereon at capital gain rates, and we would need to go no further.  For reasons we have already stated, we can not treat the transactions, as carried out, in that manner.  Petitioner asks us to "disregard the transitory exchange of the International stock for Coca-Cola stock." This we can not do.  It is one of the material facts of the case.  We know of no law or court or Board decision which would warrant us in disregarding it.  We do not think that any of the cases cited by petitioner are any warrant for such treatment.  We, therefore, approve the treatment which the Commissioner has accorded the transactions in his deficiency notice, except as to the basis of cost of petitioner's International class A stock.  The basis which the parties have agreed upon will be used in a recomputation of the deficiency.  Decision will be entered under Rule 50.