other nonrecurring items. At the time he received the Lincoln automobile the petitioner did not own a car. He had not purchased an automobile since 1954 when he had purchased a used Oldsmobile which he sold in 1955. Subsequent to selling his Oldsmobile, petitioner used automobiles furnished to him by his employer and, after receiving the Lincoln and trading it in for the Ford station wagon, he continued to use automobiles furnished by his employer. The Ford station wagon was used primarily by his wife. Except for the car in question, the petitioner has never owned a Lincoln car and has never considered purchasing one. In the notice of deficiency the respondent determined that petitioner had additional income of $852.54, stating that "the fair market value of a Lincoln Capri automobile which you received as a prize or award was $4,452.54 rather than the amount of $3,600 which was included in the income reported in your return on account thereof." The fair market value of the Lincoln automobile at the time received by petitioner in 1956 was $3,900. OPINION. Section 74(a) of the Internal Revenue Code of 1954 provides, with exceptions not here material, for the inclusion in gross income of amounts received as prizes and awards. Section 1.74–1 (a) (2) of the Income Tax Regulations, promulgated pursuant to that section, provides that if the award is not made in money but is made in goods or services then the fair market value of such goods or services is the amount to be included in income. The petitioner does not deny that there should be included in his taxable income the fair market value of the Lincoln automobile, and indeed he included the amount of $3,600 in his income tax return for 1956 on account thereof. He contends that the $3,600 represents the fair market value of the automobile in his hands since that was the amount which he realized when he traded it in, 10 days later, for a Ford station wagon, the dealer's price of which was $2,600, and boot of $1,000. The petitioner recognizes that his employer paid $4,452.54 for the automobile, but contends that this does not represent its fair market value to him, arguing that if the employer had attempted to sell the automobile, rather than give it to him, the car would have brought a much lesser price than the amount originally paid for it. The respondent contends that the fair market value of this automobile was $4,452.54, the amount which the petitioner's employer had paid for it. He points to the fact that after receiving the automobile, the petitioner owned it for 10 days and drove it from Jacksonville, Florida, to Knoxville, Tennessee, and contends that this use depre ciated the value of the car below its value at the time of its receipt by petitioner. The evidence does not show precisely when the petitioner's employer purchased the automobile, but it was within a month prior to the time it was given to the petitioner. When the car was received by the petitioner it was a new car in the sense that it had not been actually used. However, we think it is common knowledge of which we may take notice, that when an automobile has been purchased from a dealer the purchaser cannot, on a sale of the car, normally realize the price which he paid for the car, even though it has not been actually used. We think that a substantial part of the reduction in value of the car in question is attributable to this fact. On the other hand, we cannot conclude that the full reduction in value to $3,600 was attributable to this factor. It is also a matter of which we may take notice that the value of an automobile is reduced as a result of use. We think the fair market value of the car was reduced to a substantial extent as a result of the petitioner's having owned and used it for 10 days and having driven it from Jacksonville, Florida, to his home in Knoxville, Tennessee. Thus, in our opinion, neither the price paid by the employer nor the price received by the petitioner establishes the fair market value of the car in the petitioner's hands at the time he received it. The evidence adduced does not permit of an exact determination of such fair market value. Under the circumstances, we have exercised our best judgment and have concluded and found as a fact that the value of the Lincoln automobile had a fair market value of $3,900 at the time it was received by the petitioner. Cf. Cohan v. Commissioner, 39 F. 2d 540. That amount should be included in the petitioner's taxable income instead of the $3,600 reported by the petitioner in his return. Decision will be entered under Rule 50. SPROUL REALTY COMPANY, PETITIONER, V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Docket No. 90563. Filed September 13, 1962. In 1954, S corporation was formed for the purpose of developing and constructing a shopping center. S purchased a tract of land and obtained commercial zoning for such land, hired an architect to prepare plans for the shopping center, found tenants to sign leases for the planned buildings, and unsuccessfully attempted to obtain permanent mortgage financing for the project. In 1956, before physical construction of the shopping center had begun and before S had realized any taxable income from the shopping center, S agreed to sell its entire interest in the shopping center to K. of C. corporation and S adopted a plan of complete liquidation. Upon completion of construction of the shopping center in 1957, K. of C. paid S the agreed consideration and S distributed its assets to its shareholders. Fred L. Rosenbloom, Esq., for the petitioner. The Commissioner determined a deficiency in petitioner's income tax for the fiscal period July 1 to September 25, 1957, in the amount of $87,717.68. At issue is the applicability of the nonrecognition provisions of section 337 (a) of the 1954 Code to petitioner's sale of certain corporate property pursuant to a plan of complete liquidation. The Commissioner has determined that the nonrecognition provisions do not apply based on the limitation in section 337 (c) excluding collapsible corporations as defined in section 341 (b). If the Commissioner is upheld in this regard, a further question is whether the gain realized by petitioner on the sale of the assets involved constitutes ordinary income or long-term capital gain. FINDINGS OF FACT. The facts stipulated by the parties are incorporated herein by this reference. Petitioner, a Pennsylvania corporation now in liquidation, with its principal office at Grant Avenue and Blue Grass Road, Philadelphia, Pennsylvania, filed its corporate income tax return for the period July 1, 1957, to September 25, 1957, with the district director of internal revenue, Philadelphia, Pennsylvania. Early in 1954 a group of persons headed by Michael Lubin owned a one-half interest in 7 acres of unimproved real estate at the corner of State and Sproul Roads, Springfield Township, Delaware County, Pennsylvania. This land, hereinafter referred to as the Lubin tract, was commercially zoned and on it Lubin and his associates planned to develop a shopping center. The Lubin group and a man named Powell, who owned the other one-half interest in the land, had purchased the Lubin tract in 1952 for a total price of $187,500. Penn Fruit Company, Inc., a corporation operating a chain of grocery supermarkets in the Philadelphia area, was interested in obtaining a store in the area of State and Sproul Roads, and early in 1954 its officers approached Lubin to explore the possibility of negotiating for a lease on a store to be erected on the Lubin tract. Because of restrictions imposed by other leases already negotiated, Lubin was unable to lease a store to Penn Fruit on the Lubin tract. However, at that time Lubin had an option to acquire 142 acres of ground, then zoned for residential use, adjoining the Lubin tract on both sides. Lubin suggested that Penn Fruit might acquire a store on this adjoining ground if it would join with him and his associates in purchasing this ground, in having the zoning changed, and thereafter in developing it. Hanna Realty Company, a Pennsylvania corporation wholly owned by five individuals who also own or control approximately 40 percent of the stock of Penn Fruit Company, is and since the late 1930's has been used as a real estate affiliate of Penn Fruit Company. These five individuals were the principal stockholders of Penn Fruit Company prior to the time it became a "public company" in about 1952 or 1953, and they thereafter continued to dominate its affairs. Hanna Realty purchases ground required by Penn Fruit either for the erection of supermarkets, the extension of existing facilities, or for protection against competition, and additionally builds supermarkets and leases them to Penn Fruit. During the years 1955 and 1956, Hanna Realty owned and leased 12 stores occupied by Penn Fruit. From time to time Hanna Realty sold land which it had acquired for Penn Fruit when such land no longer served Penn Fruit's purposes and, in some instances, when Hanna Realty was unable to finance certain stores for Penn Fruit and found it necessary to sell the land to a financial institution or insurance company which in turn leased it back to Penn Fruit. Petitioner was formed by Hanna Realty and Lubin and his associates for the specific purpose of purchasing and developing the 141⁄2acre land parcel contiguous to the Lubin tract. Petitioner was incorporated under Pennsylvania law on June 23, 1954. Its authorized purposes, as stated in its articles of incorporation, were as follows: To buy, sell, exchange, lease and otherwise acquire, hold, own, maintain, manage, develop, improve, alter, mortgage, let, rent, convey, deal in and otherwise turn to account real estate of every class and description. To build, construct, purchase or otherwise acquire, repair, maintain, operate, manage, sell, convey and otherwise turn to account homes, office buildings, apartment houses, buildings, structures and real estate of every class and description. The shareholders of petitioner were as follows: Hanna Realty Company--- Number Percent of of shares ownership 3184 42.5 David Cohen (legal counsel for Hanna Realty Company). 634 8.5 367/2 49.0 The objective of the Hanna Realty Company and its counsel, David Cohen, in organizing and participating in petitioner's activities was to obtain a Penn Fruit store in the State and Sproul Roads area. The purpose of the Lubin group was to develop a shopping center in conjunction with the adjoining 7-acre tract in which it already had an interest. On June 30, 1954, petitioner entered into an agreement to acquire the 142-acre tract of land which was contiguous to the Lubin tract at State and Sproul Roads. Settlement under this agreement was held on October 6, 1954. Title to the 142-acre tract was held in the name of Murray A. Pierson as a strawparty until January 16, 1956, when title was formally transferred into the name of petitioner. The total cost of the land was $179,190.39. During the year 1955, petitioner through its representatives exerted continuous efforts to have the land rezoned as a shopping center district. The land was so rezoned by the Springfield Township Commissioners on December 28, 1955, on the condition that a shopping center be developed on the land within 18 months or the land would automatically revert to a residential district. In the latter part of 1955, when it appeared that the land would be rezoned for shopping center use, petitioner began looking for tenants. Hanna Realty was particularly interested in finding a good department store tenant which it believed was essential to "anchor" the development. Also toward the end of 1955, petitioner made preliminary attempts to obtain permanent financing for the shopping center project. Among the department stores approached as potential tenants was E. J. Korvette, Inc., with whom discussions were held over a 4-month period beginning in August or September 1955. An oral agreement between petitioner and Korvette was reached early in January 1956. On January 9, 1956, petitioner obtained a commitment from Penn Fruit for lease of a supermarket to be constructed on the property by petitioner. Under the terms of this commitment, as later amended, the lease was to run for an initial term of 25 years at a basic net rental of $42,000 per year, with the lessee given the option to renew for four additional 5-year terms at a basic rental of $18,900 per year during any renewal period. On March 26, 1956, a lease was signed by Korvette for a department store to be constructed on the property by petitioner. This lease was to run for an initial term of 21 years at an annual basic rental of $210,000 per year (subsequently adjusted to $203,000 per year), and the lessee was given the option to renew for three additional periods of 5 years each at a stipulated reduced rental. The lease was subject to cancellation if petitioner did not obtain financing for the construc |