Court Opinion

ID: 4603366
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:31:48.337343+00
Date Added: 2024-06-11T07:52:50.014688
License: Public Domain

GEORGIA SAVINGS BANK & TRUST COMPANY, EXECUTOR OF THE ESTATE OF JOSEPH E. BOSTON, SR., PETITIONER, ET AL., 1v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.  Georgia Sav. Bank & Trust Co. v. CommissionerDocket Nos. 55581-55591.United States Board of Tax Appeals28 B.T.A. 1153; 1933 BTA LEXIS 1043; August 18, 1933, Promulgated *1043  Where the stockholders in 1928 exchanged their stock in A corporation, a party to a reorganization, for stock only in B corporation, also a party to the reorganization, and A corporation sold its real estate and part of its personal property to B corporation for a cash consideration of $200,000 and declared dividends of $200,000 out of surplus, held, that the two transactions were separate both in substance and in form, although part of a general plan; that the stockholders of A corporation exchanged stock for stock only, and not for stock and cash, and that under the provisions of section 112(b)(3) of the Revenue Act of 1928, neither gain nor loss is recognizable on the transaction to the stockholders.  John E. McClure, Esq., and Martin E. Kilpatrick, Esq., for the petitioners.  W. Frank Gibbs, Esq., and N. D. Cann, Esq., for the respondent.  TRAMMELL *1154  These proceedings, duly consolidated for hearing, are for the redetermination of deficiencies in income tax for the calendar year 1928 as follows: DocketPetitionerDeficiencyNo.55581Georgia Savings Bank & Trust Co.,$904.15Executor of the Estate of Joseph E. Boston, Sr.55582Corrie H. Brown1,512.8255583Corrie Hoyt Brown1,046.1655584Georgia Savings Bank & Trust Co., 221.23Administrator of the estate of Elijah Brown55585George M. Brown, Sr1,330.1955586George M. Brown, Jr345.9955587W. M. Camp825.1955588Grisham Investment Co8,788.1055589W. R. Hoyt588.8555590Mrs. George A. Matson, Executrix of 395.03the Estate of George A. Matson55591Brooks Mell420.39*1044  The issue in each case is whether the reorganization involved was consummated by the purchase of the Excelsior Laundry Co.'s capital stock for cash and stock of the Atlanta Laundries, Inc., or by the purchase of certain assets of the Excelsior Laundry Co. for cash and the exchange of the latter company's stock by its stockholders for stock only in the Atlanta Laundries, Inc.  FINDINGS OF FACT.  The Georgia Savings Bank & Trust Co. is a corporation, with its principal office at Atlanta, Georgia, and is the duly appointed executor of the estate of Joseph E. Boston, Sr.  It is also the duly authorized administrator of the estate of Elijah Brown.  Mrs. Joseph A. Matson is an individual residing at Greensboro, North Carolina, and is the duly authorized and acting executrix of the estate of Joseph A. Matson.  The Grisham Investment Co. is a Georgia corporation, with its principal office at Atlanta.  The other petitioners in the proceedings herein are all individuals, residing at Atlanta, Georgia.  During the year 1927 and for several years prior thereto, the petitioners and the decedents of the estates here represented owned the entire capital stock of the Excelsior Laundry Co. *1045  of Atlanta, Georgia.  During the latter part of 1927, negotiations were entered into by Herbert Haas, an attorney of Atlanta, Georgia, and one George W. Robertson, representing a group of New Orleans, Louisiana*1155  capitalists, with a number of the principal laundries in Atlanta, including the Excelsior Laundry Co., for the purpose of effecting a reorganization of those companies into one large company.  On October 6, 1927, after certain preliminary negotiations had occurred, the Excelsior Laundry Co. addressed a letter to Haas, reading in material part as follows: Referring to our conversation of yesterday.  We are authorized by the Board of Directors of the Excelsior Laundry Company to say to you that we will recommend to the stockholders of the Excelsior Laundry Company that tney join with the Board of Directors of said Company in selling to you, or parties whom you may represent, the entire capital stock of that company (one thousand shares) at the rate of $750.00 per share, that is seven hundred and fifty thousand dollars ($750,000.00).  We guarantee the delivery of eighty per cent (80%) of the stock at that price and have no doubt but that all the stockholders*1046  will join with us in making the sale so that the purchasers will get the entire one thousand (1000) shares.  * * * This option to purchase the stock of the Excelsior Laundry Co. is to expire at noon on November 15, 1927.  In the event you decide to exercise the option and purchase the stock you are to buy and pay for it as follows, to-wit: five hundred and fifty (550) shares on November 15, 1927, and the balance, to-wit: four hundred and fifty (450) shares, on January 2, 1928.  * * * EXCELSIOR LAUNDRY COMPANY GEORGE M. BROWN, Chairman of Board of Directors.JOSEPH E. BOSTON, President.Sometime after October 6, 1927, and prior to November 15, 1927, the above option was amended as follows: GEORGIAFULTON COUNTY The price of seven hundred fifty thousand (750,000) Dollars, in the option heretofore executed by the undersigned, EXCELSIOR LAUNDRY COMPANY, to HERBERT J. HAAS, is herewith changed as follows: Cash$200,000.00Preferred shares5,000Common shares12,500the preferred and common shares to be in a corporation to be organized by the said HERBERT J. HAAS and his assigns IN WITNESS WHEREOF, the undersigned, EXCELSIOR LAUNDRY, *1047  has caused these presents to be executed by its duly authorized officers, the day and year first above written.  EXCELSIOR LAUNDRY By: GEORGE M. BROWN, Chairman of Board of Directors.Attached to and forms part of option dated October 6, 1927.  *1156  On November 15, 1927, a written agreement was entered into between the Excelsior Laundry Co., as party of the first part, and George W. Robertson, as party of the second part, reading in material part as follows: THIS AGREEMENT, Made and entered into this 15th day of November, 1927, by and between EXCELSIOR LAUNDRY COMPANY a corporation organized and existing under and by virtue of the laws of the state of Georgia, with its situs at Atlanta, Georgia, party of the first part, and GEO. W. ROBERTSON, a resident of New Orleans, Louisiana, party of the second part; WITNESSETH: WHEREAS, First party did execute and deliver an option to HERBERT J. HAAS on the 6th day of October, 1927, which said option has been transferred by the said Herbert J. Haas to the second party; and, WHEREAS, Said option has been exercised by the second party; NOW, THEREFORE, In consideration of the sum of One ($1.00) Dollar by each party*1048  to the other in hand paid, the receipt of which is hereby acknowledged, and in further consideration of the mutual covenants and ageements of the parties herein provided and set forth, it is agreed: I.  First party hereby agrees to sell to second party or his assigns as a going concern, and second party agrees to purchase, its business, together with its plant or plants, including all real estate now owned and occupied by said first party for the purpose of conducting the business, with all buildings, improvements, structures situated and being thereon, the appurtenances and easements appertaining thereto, all machinery, tools, fixtures, appliances and apparatus employed as a part thereof, including trucks, drays, garage equipment, office furniture and fixtures located at its plant or plants, and in its branch offices, together with all trade-marks, inventions, processes, and trade names now in its possession, or owned and controlled by it, and the goodwill of said business of first party as a going concern, and, also, cash, and/or accounts receivable, and/or supplies (supplies at market value) amounting to Twenty Thousand and No/100 ($20,000) Dollars * * * and if said cash, and/or*1049  accounts receivable, and/or supplies do not amount to the said Twenty Thousand and No/100 ($20,000) Dollars, then, and in that event, the second party shall have the right to deduct any difference from the cash portion of the purchase price, as hereinafter provided.  II.  The said first party will sell the above property to the second party, and the second party will purchase the above property from the first party, if the representations of the first party hereinafter set forth are correct, and the said second party performs or tenders performance of its covenants and agreements hereinafter set foth, for the consideration of Two Hundred Thousand ($200,000) Dollars in cash, Five Thousand (5,000) shares of preferred stock, and Twelve Thousand Five Hundred (12,500) shares of common stock, of a corporation to be organized by the second party, the parties hereto agreeing that the said corporation shall be created and capitalized as set out and shown in memoranda attached hereto and made a part hereof as Exhibit A.  * * * *1157  V. Second party agrees: (a) That, within forty-five (45) days from this date, it will give to the first party at least fifteen (15) days' written*1050  notice of the time of the closing of this transaction, which date of closing shall not be later than January 16, 1928.  (b) That in said notice it will specify the time and place of closing.  (c) That at such time and place it will pay and deliver the purchase price, as and upon the conditions specified in Section II hereof, provided, however, in any event, one-half (1/2) of the purchase price shall be paid or delivered on or before December 31, 1927, and the other one-half (1/2) in January, 1928, but on or before the 16th day of said month.  VI.  The parties hereto agree: * * * (d) That anything to the contrary herein notwithstanding, first party may, upon giving the second party written notice by December 10, 1927, of its election to deposit with the Citizens & Southern National Bank, at its main office, in Atlanta, Georgia, deposit certificates properly endorsed representing percent of its capital stock, and written assurance that its remaining stock certificates, properly endorsed, will be delivered and deposited within a reasonable time thereafter, and may, instead of selling and delivering its properties and assets as hereinabove mentioned, have its stockholders sell*1051  and convey its said stock for the same purchase price; provided that, in the opinion of the attorneys for the second party, the shares so delivered can by corporate action, authorize the execution of the conveyance by the corporation of its properties and businesses to second party or his assigns, and, provided, further, that all of the covenants and agreements of the first party herein not inconsistent with such change in plan, and including specifically, those relating to the ownership of property and liens and encumbrances thereon, shall remain in full force and effect.  If the said stock is so delivered to the said bank, then at the time of payment of the purchase price, the aforesaid cash and securities shall be delivered by the second party to the said bank, and, thereupon, title to the said stock shall at once pass to the said second party, and the said bank shall at once deliver the said stock to the said second party.  In the event said stock is sold, then the consideration specified in Section II hereof shall be divided as follows: To the benefit of the holders of Seven Hundred Three (703) shares of the stock of the first party, said holders to be designated in writing*1052  by George M. Brown, there shall be paid or delivered One Hundred Forty Thousand Six Hundred ($140,600.00) Dollars in cash, Thirty Eight Hundred Twelve (3812) shares of preferred stock, and Ninety Five Hundred Thirty (9530) shares of common stock in the new corporation, and to the benefit of the holders of the remaining Two Hundred Ninety Seven (297) shares of stock of the first party, there shall be paid or delivered Fifty Nine Thousand Four Hundred ($59,400) Dollars in cash, Eleven Hundred Eighty Eight (1188) shares of preferred stock, and Twenty Nine Hundred Seventy (2970) shares of common stock in the new corporation - and said first party warrants that said One Thousand (1,000) shares will be all of its outstanding stock.  * * * EXCELSIOR LAUNDRY COMPANY (Seal) By GEORGE M. BROWN (Seal) Chairman of the Board of Directors,G. W. ROBERTSON (Seal) *1158  On December 3, 1927, George M. Brown, as chairman of the board of directors of the Excelsior Laundry Co., wrote the following letter to Herbert J. Haas, attorney for George W. Robertson: This is to give you formal written notice as provided in Article "D" of Section "6" of the agreement by and between George*1053  M. Brown, as Chairman of the Board of Directors of the Excelsior Laundry Company, representing the stockholders of said company, and George W. Robertson, which was signed on November 15, 1927, that it is the intention of the stockholders of the Excelsior Laundry Company, in accordance with its option dated October 6, 1927, to deliver to said Robertson their stock certificates of said Excelsior Laundry Company instead of selling the company to said Robertson as a corporation.  This notice is in accordance also with my verbal notice to Mr. Robertson in your presence that we would sell the company only as private stockholders and not as a corporation.  We will, therefore, under the agreement, expect the party of the second part to be ready to make payment for one-half (1/2) of the stock on or before December 31, 1927.  If you are not the party for me to notify, please advise me at once that you have sent this notice to Mr. Robertson.  Your kind attention will be very much appreciated.  The surplus of the Excelsior Laundry Co. on December 29, 1927, was in excess of $200,000, and on that date the directors declared a dividend of $100,000 which was payable and paid on December 30, 1927, out*1054  of the surplus fund, to stockholders of record December 20, 1927, 10 percent of the dividend being paid in cash and 90 percent in notes of the company due on or before January 20, 1928.  The notes so given to the stockholders on December 30, 1927, in connection with the dividend resolution were worth par or face value.  At a special meeting on January 11, 1928, the board of directors of the Excelsior Laundry Co. declared another dividend of $100,000 from the surplus fund of the corporation.  This dividend was payable on or before January 20, 1928, to stockholders of record January 11, 1928, and was paid on January 16, 1928.  At this same meeting the directors passed a resolution instructing the treasurer of the company to pay to the "Georgia Savings Bank and Trust Company, Trustee," the sum of $47,994.51 to be used to pay any claims thereafter filed against the company prior to January 16, 1928, with the provision that after the payment of such claims the remainder of the fund should be paid pro rata to the stockholders of record at the close of business January 14, 1928, as a liquidating dividend on their stock.  The contingencies for which the sum of $47,994.51 was placed in*1055  trust were not settled or otherwise disposed of prior to the close of 1928.  A balance remains in the fund, which has not yet been distributed among the former stockholders of the Excelsior Laundry Co.  Subsequent to the declaration of the dividend of $100,000 on December 29, 1927, George M. Brown, chairman of the board of directors of the Excelsior Laundry Co., informed the promoters of the *1159  new company, Atlanta Laundries, Inc., what had been and was being done, and the promoters of the new corporation agreed to a modification of the existing contract to the extent that the new corporation would purchase and the Excelsior Laundry Co. would sell its real estate and certain of its personal property for $200,000 cash, and the stockholders of the Excelsior Laundry Co. would exchange their stock in that company for stock only in Atlanta Laundries, Inc.  These changes in the method of carrying out the purchase and sale agreement of November 15, 1927, were made at the request of the stockholders of the Excelsior Laundry Co. and were induced by the consideration of tax liability.  On January 14, 1928, an agreement was entered into between the stockholders of the Excelsior*1056  Laundry Co., as party of the first part, and Atlanta Laundries, Inc., as party of the second part, reading in material part as follows: THIS AGREEMENT, Made and entered into this 14th day of January, 1928 by and between WM. R. HOYT, MRS. MARY E. OLIVER, W. M. CAMP, BROOKS MELL, MRS. EMILY C. WOODRUFF, E. WOODRUFF, GEORGE A. MATSON, GEO. M. BROWN TRUST FUND, ELIJAH A. BROWN COMPANY, JOSEPH E. BOSTON, JOSEPH E. BOSTON, JR., GEORGE M. BROWN, JR., MRS. GEORGE M. BROWN, JR., MISS CORRIE HOYT BROWN, MRS. CORRIE H. BROWN, GEORGE M. BROWN, and GRISHAM INVESTMENT COMPANY, parties of the first part, and ATLANTA LAUNDRIES, INC., a corporation of the State of Delaware, and County of Dover, party of the second part; WITNESSETH: WHEREAS, Parties of the first part are the owners of the entire capital stock of the Excelsior Laundry Company, which did on November 15, 1927 execute an agreement with George W. Robertson, which said agreement is herewith referred to and made a part hereof as if fully incorporated herein; and, WHEREAS, Said agreement between Excelsior Laundry Company and George W. Robertson has been assigned to Atlanta Laundries, Inc., and, WHEREAS, In accordance with said contract, *1057  the parties of the first part did in meeting duly called and held on January 11, 1928, authorize the conveyance by the Excelsior Laundry Company of its real estate and a portion of its personal property at and for the sum of Two Hundred Thousand ($200,000) Dollars; and, WHEREAS, In accordance with Article VI, Section (d) the stockholder of the Excelsior Laundry Company has elected to deliver its certificates properly endorsed, representing one hundred (100%) percent of its capital stock, instead of selling and delivering its property and assets as set forth in said contract; NOW, THEREFORE, The said parties of the first part, for and in consideration of Five Thousand (5,000) shares of preferred stock of no par value, and Twelve Thousand Five Hundred (12,500) shares of common stock of no par value, of the party of the second part, the receipt whereof is hereby acknowledged, have granted, bargained, sold and conveyed, and by these presents do grant, bargain, sell and convey unto the said party of the second part, its successors and assigns, the one thousand (1,000) shares of the capital stock of Excelsior Laundry Company, * * * *1160  This Indenture is made in compliance*1058  with and pursuant to the agreement of November 15, 1927 between Excelsior Laundry Company, as party of the first part, and George W. Robertson, as party of the second part, which has been duly assigned by George W. Robertson to the party of the second part, and embodies all representations, warranties, agreements, and covenants in said agreement as the representations, warranties, agreements and covenants of the parties of the first part in this agreement as if said representations, warranties, agreements and covenants were expressly set forth herein.  IN WITNESS WHEREOF, The said parties of the first part have hereunto set their hands and affixed their seals, the day and year first above written, the corporations acting through their duly authorized officers.  On the same date, January 14, 1928, an agreement was entered into between the Excelsior Laundry Co., as party of the first part, and Atlanta Laundries, Inc., as party of the second part, reading in material part as follows: THIS INDENTURE, Made this 14th day of January, 1928, between EXCELSIOR LAUNDRY COMPANY, a corporation of the State of Georgia and County of Fulton, party of the first part, and ATLANTA LAUNDRIES, INC. *1059  , a corporation of the State of Delaware and County of Dover, party of the second part; WITNESSETH: That said party of the first part, for and in consideration of the sum of Two Hundred Thousand ($200,000) Dollars, cash in hand paid at and before the sealing and delivery of these presents, the receipt whereof is hereby acknowledged, has granted, bargained, sold and conveyed, and by these presents does grant, bargain, sell and convey unto the said party of the second part, its successors and assigns, the following real and personal property: (Description of property omitted as not material) * * * This conveyance is made pursuant to contract dated Novemer 16, 1927 between party of the first part and George W. Robertson, duly assigned by George W. Robertson to party of the second part, and specifically referred to as containing the warranties and agreements of party of the first part with respect to the property herein contained, and which said warranties, representations and agreements are made a part hereof as if fully set forth.  * * * TO HAVE AND TO HOLD THE SAID bargained premises, together with all and singular the rights, members and appurtenances thereof, to the same*1060  being, belonging, or in any wise appertaining, to the only proper use, benefit and behoof of it, the said party of the second part, its successors and assigns, forever, IN FEE SIMPLE.  And the said party of the first part, for itself, its successors and assigns, will warrant and forever defend the right and title to the above described property unto the said party of the second part, its successors and assigns, against the lawful claims of all persons whomsoever.  IN WITNESS WHEREOF, The said party of the first part has hereunto set its hand and affixed its seal, the day and year first above written, through its officers duly authorized by corporate action.  The above written instruments were not signed by the Atlanta Laundries, Inc., but the provisions thereof were agreed to and carried out by the respective parties on January 16, 1928, on which *1161  date the Excelsior Laundry Co. sold and conveyed to the Atlanta Laundries, Inc., its real estate and certain of its personal property for a cash consideration of $200,000; and on the same date the stockholders of the Excelsior Laundry Co. exchanged their stock in that company for 5,000 shares of preferred and 12,500 shares*1061  of common stock in the Atlanta Laundries, Inc.  On the same date a meeting was held to consummate the various transactions, at which the Excelsior Laundry Co. and its stockholders were represented by George M. Brown.  At that time a cashier's check for $200,000 and 5,000 shares of preferred and 12,500 shares of common stock in the Atlanta Laundries, Inc., were turned over and delivered to Brown as agent for the Excelsior Laundry Co. and its stockholders, and Brown thereupon delivered to the purchaser a deed of conveyance and bill of sale executed by the Excelsior Laundry Co. and the certificates of the latter corporation's stock properly endorsed to the Atlanta Laundries, Inc.  The cashier's check for $200,000 was on the same day deposited to the credit of the Excelsior Laundry Co. in the Georgia Savins Bank & Trust Co.  The returns of all the stockholders of the Excelsior Laundry Co. were made on the basis of cash receipts and disbursements, and in their 1927 returns the stockholders reported as dividends their proportionate parts of the dividend declared on December 29, 1927, and paid by the Excelsior Laundry Co. on December 30, 1927; and in their 1928 returns, they reported*1062  as dividends their respective portions of the dividend declared on January 11, 1928, and paid by the Excelsior Laundry Co. on January 16, 1928.  OPINION.  TRAMMELL: The issue here is whether the petitioners exchanged their stock in the Excelsior Laundry Co. for 5,000 shares of preferred and 12,500 shares of common stock in Atlanta Laundries, Inc., plus $200,000 cash, or whether they exchanged their stock in the old corporation for stock only in the new corporation.  The transaction occurred in 1928, under the circumstances set out in our findings of fact.  The respondent has determined, and the petitioners concede, that the transaction constituted a reorganization within the meaning of that term as used in section 112(i)(1) of the Revenue Act of 1928.  If the petitioners exchanged their stock solely for stock, no gain or loss is recognizable to them under the provisions of section 112(b)(3) of that act, but if they exchanged their stock for stock and cash, then under subsection (c)(1) of that section the gain, if any, must be recognized to the extent of the money received.  *1162  This question is largely one of fact, and from a careful consideration of all the evidence*1063  in the record before us, we have reached the conclusion, and so found, that the petitioners exchanged their stock for stock only; hence, the transaction is nontaxable.  The respondent objects that the written instruments in question were not signed by either the promoters or the Atlanta Laundries, Inc., and therefore did not constitute binding contract; hence, that the contract of November 15, 1927, as modified and fixed by the written notice of December 3, 1927, as modified and fixed by the tract, by which the stockholders of the Excelsior Laundry Co. elected to exchange their stock in that company for cash and stock in the new company, was the contract which was carried out.  Such contention, we think, is not supported by the evidence.  Herbert J. Haas, who was the attorney for and represented the promoters and the Atlanta Laundries, Inc., both in the negotiations and in carrying out the contract in question, testified that section VI (d) of the contract was not carried out; that no cash was in fact paid by the Atlanta Laundries, Inc., to the stockholders of the Excelsior Laundry Co. for their stock; that all of the previous agreements were modified or changed, as the transactions*1064  were finally closed in accordance with the executed agreements of January 14, 1928.  This witness further testified that the transaction was closed in the manner provided by the contracts or agreements dated January 14, 1928, which were agreed to by him in behalf of the Atlanta Laundries, Inc., that the final agreements were drawn by him or prepared in his office, and that he did not consider it was necessary for the Atlanta Laundries, Inc., to sign the instruments, as it was in the one instance a transferee of stock and in the other the grantee in a deed; further, that the contracts became fully executed upon their delivery on January 16, 1928.  The respondent argues that "Only after consulting their attorneys and considering the question of Federal taxation did the stockholders attempt to disguise this transaction to make it appear as a nontaxable transaction," and that we should apply the principal of looking through form to substance and, so viewing the entire transaction, hold that the petitioners exchanged their stock in the Excelsior Laundry Co. for stock in Atlanta Laundries, Inc., and cash.  As we view the matter, under the facts presented here, there is no occasion*1065  to apply the principle of looking through form to substance.  The stockholders of the Excelsior Laundry Co., both in substance and in form exchanged their stock in that corporation for stock only in Atlanta Laundries, Inc., and to reach any other conclusion by applying a legal fiction would, in our opinion, be inconsistent with the facts.  *1163  Tax liability must be determined on the basis of what actually occurred, and not what might have occurred; or, as said by the Supreme Court in , "Questions of taxation must be determined by viewing what was actualy done rather than the declared purpose of the participants * * *." But here what was actually done was entirely in accord with the declared purpose of the participants, so that both substance and form are identical.  See also ; ; affd., ; ; *1066 . Also, we think there is no support for the implication to be drawn from the respondent's argument that only after consultation with their attorneys respecting the question of Federal taxation did the petitioners attempt to make the transaction appear as nontaxable.  As above pointed out, this transaction might have been consummated in either one of three forms, and while substantially the same result would have been achieved by either, the tax liability might have been different.  In this situation, prior to the carrying out of the contract of November 15, 1927, and prior to the incurring of any tax liability in connection therewith, the petitioners obtained the consent of the other party to modify the contract so that the transaction as carried out thereunder would minimize their tax liability.  In our opinion that conduct of the petitioners is not subject to adverse criticism.  The avoidance of tax liability prior to its incurrence is an entirely different thing from the evasion of tax liability after it is definitely incurred.  If a transaction is carried out in such form as to avoid or reduce tax liability, it is not subject to*1067  legal censure, provided the method adopted is legal. . In the absence of fraud, it is immaterial that the method of effecting the transfer here in question was adopted by these petitioners for the express purpose of avoiding taxes.  , and authorities cited.  See also . Finally, the respondent argues that if this transaction did not constitute an exchange of stock for stock and cash, the stockholders would in any event be taxable on the basis of a liquidating dividend under section 115(c) of the Revenue Act of 1928, since the $200,000 received by the Excelsior Laundry Co. from the Atlanta Laundries, Inc., was distributed to the stockholders.  It is a sufficient answer to this argument to point out that the distribution of that amount did not constitute either a complete or partial liquidation of the Excelsior Laundry Co.  The stockholders did not receive the $200,000 in payment or part payment of their stock; they exchanged their stock in the Excelsior Laundry Co. for stock in the Atlanta Laundries, *1164  Inc. *1068  , and received the $200,000 as a dividend.  Upon the exchange of those stocks the Atlanta Laundries, Inc., thereupon became the sole stockholder of the Excelsior Laundry Co.  The sale or exchange of its stock by a group of individual stockholders to a new corporate stockholder did not constitute a liquidation of the Excelsior Laundry Co.  The latter company sold its real estate and a part of its personal property for $200,000 in cash, and the fact that a portion of the cash was used to pay dividends declared from the corporation's surplus, which was in excess of that amount, does not alter the legal effect of the dividends, and any profit derived from the sale of its assets was the profit of the Excelsior Laundry Co.  . Two legal transactions, separate both in substance and in form, can not theoretically be considered as one transaction in order to impose a tax.  . And conversely, separate transactions may not be considered as one in order to avoid a tax.  *1069 ;A corporation is legally distinct from its shareholders, and in the absence of fraud or unfairness, their separate transactions will not be disregarded, although part of a general plan.  In , we held that where a contract, after reciting that the shareholders of a corporation desired to sell their interests in the business and property of the corporation as well as their shares, provided that the corporation would sell its assets for $630,000 and declare a dividend of its surplus, and that the shareholders would sell their shares for $200,000, the shareholders received a dividend of $400,000 and sold their shares for $200,000 and did not sell their shares for $630,000.  The principles applied in the above cases are applicable here.  The respondent's determinations are disapproved, but since the deficiencies asserted did not in each instance result entirely from adjustments to income on account of the exchange of stocks hereinabove discussed, Reviewed by the Board.  Judgment will be entered under Rule 50.Footnotes1.   Proceedings of the following petitioners are consolidated herrewith: Corrie H. Brown; Corrie Hoyt Brown; Georgia Savings Bank & Trust Co., Administrator of the Estate of Elijah Brown; George M. Brown, Sr.; George M. Brown, Jr.; W. M. Camp; Grisham Investment Co.; W. R. Hoyt; Mrs. George A. Matson, Executrix of the Estate of George A. Matson; and Brooks Mell. ↩