shall be assessed within five years after the return was filed." From the foregoing it is clear that it is the date of filing the return and not the date that the return was due that determines the period within which the tax may be assessed by the Commissioner. The return of this taxpayer for the fiscal year ended June 30, 1919, was not filed until October 20, 1920, and it is from that date that the period of assessment runs. In this connection it is significant that section 278 (a) of the Revenue Act of 1924 provides that, upon failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment at any time. Thus, if the taxpayer had not filed his return at all, the tax could be assessed at any time-having filed his return after it became delinquent, the date of filing fixes the period within which the assessment may be made.

The Commissioner in his answer admits that for the fiscal year ended June 30, 1921, there was improperly included in income interest from United States obligations in the amount of $140.53, resulting in an overstatement of the tax in the amount of $14.05.

APPEAL OF NORTHERN MICHIGAN TRANSPORTATION CO. Docket No. 3168. Submitted July 6, 1925. Decided December 31, 1925.

The taxpayer which, by its charter, was authorized to operate steamships for hire upon the Great Lakes and upon the high seas, purchased from the United States two steamships which were delivered to it in the ports of New York and Boston. In order that certain repairs and changes necessary for profitable operation might be made, and in order that the vessels might be more profitably operated in its business, taxpayer caused the vessels to be removed under their own power from New York and Boston to its dock at Milwaukee, at a cost of $45,627.97. Held, that the cost of transporting the vessels was a legal deduction from gross income as an ordinary and necessary business expense.

Robert Ash, Esq., for the taxpayer.

M. N. Fisher, Esq., for the Commissioner.

Before JAMES, LITTLETON, SMITH, and TRUSSELL.

This is an appeal from the determination of a deficiency in income and profits tax for the calendar year 1919 in the amount of $21,876.94, arising from the refusal of the Commissioner to permit the taxpayer to deduct as an ordinary and necessary business expense for the calendar year 1919 the sum of $45,627.97, paid by it in transporting from New York and Boston to Milwaukee two steamships purchased by it from the United States Government.

FINDINGS OF FACT.

The taxpayer is a Wisconsin corporation with its principal office at Chicago, Ill., and is engaged in the business of transportation for hire upon the Great Lakes and the high seas. In 1919, it operated steamers between Chicago, Milwaukee, and other Lake ports, and, in addition, chartered to others certain of its ships for service to points designated by the charterer. Its charter provided in part as follows:

To carry on a general transportation business for passengers and freight upon the Great Lakes, and all other lakes and rivers and harbors and all other waters tributary thereto, both within, without, or contiguous to the borders of the United States, and also upon the high seas.

In November, 1919, the taxpayer, being in need of additional ships, purchased from the United States Government the S. S. Puritan and the S. S. General O'Reilly, which were at the time of purchase lying in the ports of New York and Boston, respectively, where they were delivered to the taxpayer. These vessels had previously operated on the Great Lakes and were well known to taxpayer. They were acquired by the taxpayer upon competitive bids. At the time of purchase the vessels were in condition to be operated by the taxpayer, but, in order to be thoroughly satisfactory and operated profitably, certain repairs and changes were necessary. These repairs were subsequently made and charged to capital account. Immediately upon delivery of the vessels the taxpayer caused them to be transported under their own power from the ports of New York and Boston to its dry dock at Milwaukee at an expense of $45,627.97.

On its voyage from New York to Milwaukee the Puritan carried about four carloads of supplies, consisting of lifeboats, life rafts, life preservers, mattresses, blankets, etc., which were also purchased by the taxpayer from the United States Government.

The General O'Reilly on its voyage from Boston to Milwaukee came upon a wrecked coal vessel in the St. Lawrence River, from which taxpayer purchased 600 tons of coal at $7 per ton. This coal was transported on the General O'Reilly for use by the taxpayer in its business. The General O'Reilly, with minor changes, was put into service soon after its arrival at Milwaukee.

The Puritan had been converted by the United States Government into a hospital ship, and considerable repairs and changes were necessary to make it fully serviceable. It was placed in service some time during the year 1920.

Had taxpayer desired, it could, under its charter, have placed these ships in service for hire at the ports of delivery. It concluded, however, that it was to the best interest of its business to move

the vessels to winter quarters at Milwaukee, and, after certain changes and repairs, to place them in service from that port.

DECISION.

The deficiency, if any, should be computed in accordance with the following opinion. Final determination will be settled on 10 days' notice, under Rule 50.

OPINION.

LITTLETON: The taxpayer contends that the cost of removing to Milwaukee the two vessels purchased from the United States Government and delivered to it in the ports of New York and Boston was an ordinary and necessary business expense and deductible from gross income. The Commissioner, on the other hand, contends that the cost of moving the vessels was a part of their cost and should be capitalized.

We are of the opinion that the Commissioner was in error in refusing to allow the taxpayer to deduct as an ordinary and necessary business expense the cost of transporting the vessels from New York and Boston to Milwaukee.

Taxpayer for many years had been engaged in the business of transporting freight and passengers for hire under a charter which authorized it to engage in this business upon the Great Lakes and upon the high seas. Upon delivery of the vessels to it by the United States Government, taxpayer deemed it to its best interest to remove them to Milwaukee for repairs and changes and to place them in service at that point. Accordingly, they were transported under their own power to Milwaukee at a cost of $45,627.97, for wages, fuel, food, insurance, etc.

The fact that the ships might have carried a cargo for hire, or supplies for taxpayer, or no cargo at all, does not, in our opinion, change the character of the expenditure. We are of the opinion from the evidence in this appeal that the cost of transporting the vessels from New York and Boston to Milwaukee was an ordinary and necessary business expense and deductible from gross income. for the year 1919.

On reference to the Board, TRAMMELL dissents.

APPEAL OF H. J. KELLY.

Docket No. 1796. Submitted June 12, 1925. Decided December 31, 1925.

Held, that notes received as part consideration for the sale of stock constituted taxable income in 1919.

Irvine P. Aten, Esq., for the taxpayer.

A. Calder Mackay, Esq., for the Commissioner.

Before GRAUPNER, TRAMMELL, and PHILLIPS.

This appeal involves a deficiency in income tax for 1919 in the amount of $27,484.89. It is based upon the action of the Commissioner in treating the sale of certain stock as a closed transaction instead of as an installment sale, as was done by the taxpayer in his income-tax return, and in the action of the Commissioner in holding that certain of the stock was the property of the taxpayer and not that of another individual in whose name it appeared on the corporation's books.

FINDINGS OF FACT.

The taxpayer was one of the original incorporators of the Dakota Iron Store, a corporation organized and existing under the laws of South Dakota, with its principal place of business at Sioux Falls. The original paid-in capital stock of the corporation was $25,000, divided into 250 shares of a par value of $100 each. The stock was issued 125 shares to H. J. Kelly, 115 shares to D. S. Reardon, and 10 shares to G. W. Gillispie. The corporation was successful in its operation and made large profits from the date of its organization until 1918. During the years 1910 to 1919 the corporation declared large stock dividends.

On March 1, 1913, Kelly, having received 125 shares as stock dividends, was the owner of 250 shares of the corporation's stock. It had a fair market value on that date of $590.62 per share. On April 30, 1915, he received an additional 125 shares of stock. On February 1, 1917, he received 250 shares of the same stock. On January 8, 1918, he received another 250 shares. On January 8, 1918, he purchased 125 shares at $100 per share, making a total cost of $12,500. On January 14, 1919, he received 250 more shares, making a total of 1,250 shares of stock of the Dakota Iron Store owned by Kelly on the day of the sale in 1919.

Gillispie had received stock dividends so that, in June, 1919, he was the owner of 100 shares of stock of the corporation. Kelly was owner of record of 1,240 shares and Margaret Kelly was owner of record of 10 shares. They belonged, however, to Kelly.

The stock received by Kelly, except that subscribed by him originally, which was owned on March 1, 1913, and except that which he purchased on January 8, 1918, was received as stock dividends.

The stock appearing in the name of Gillispie belonged to Gillispie and was sold by Kelly as his agent. No part of the income from the sale of such stock belonged to Kelly.

On July 21, 1919, Kelly sold his stock to Reardon, and, acting as the agent for Gillispie, included Gillispie's stock in the sale. For the 1,250 shares owned by Kelly he received $55,700 in cash on July 1, 1919; $32,300 in 1920; $54,000 in 1921; $54,000 in 1922, and $54,000 in 1923. The sum of $20,000 in cash was paid to Kelly for Gillispie on account of the sale of the 100 shares owned by Gillispie. The deferred purchase price was evidenced by promissory notes which were secured by a deposit of the stock as collateral. There was no competent evidence as to the value of the notes received in payment..

DECISION.

The deficiency should be computed in accordance with the following opinion. Final determination will be settled on 20 days' notice, under Rule 50.

OPINION.

TRAMMELL: On July 21, 1919, the taxpayer owned 1,250 shares of stock. Of this number, 125 shares of the par value of $12,500, which had been acquired at that price in 1910, had a market value on March 1, 1913, of $590.62 per share. In 1918 he purchased an additional 125 shares at $100 per share. The remaining stock was received by him as stock dividends. The stock owned by the taxpayer was sold in 1919 for a total consideration of $250,000. Since the sale of the stock received as dividends and the stock originally acquired was consummated in one transaction, the entire cost of the stock was represented by the purchase price of that stock which had been purchased.

The Commissioner considered that the 100 shares appearing in the name of Gillispie belonged to Kelly and that the initial payment of $75,700 was in excess of one-fourth of the purchase price of the stock sold. The evidence convinces the Board that the Commissioner was in error in that respect and that Gillispie was the owner of the stock appearing in his name on the books of the corporation. Of the cash received, $20,000 was for Gillispie's stock and should not be included in the gross income of the taxpayer. It thus appears that taxpayer received $55,700 in cash of a total sales price of $250,000, the balance being represented by notes.

It was not shown that the notes received for the property sold were not worth their full face value or that there was not a market therefor. In the absence of such showing the transaction amounted to the receipt of cash and notes which were the equivalent of cash, and as such the transaction was a single closed transaction in the year 1919. The taxpayer received cash and the equivalent of cash for the stock.