Jones, 58 F. Supp. 967 (W. D., Okla., 1944), appeal dismissed 147 F. 2d 856 (C. A. 10, 1945).

It is apparent, further, that the steps by which the transfer from petitioner to Old Peoria was made, added together, result in a clear plan of reorganization, even though no written or formal plan is evident. William M. Liddon, 22 T. C. 1220 (1954); Richard H. Survaunt, 5 T. C. 665 (1945), affd. 162 F. 2d 753 (C. A. 8, 1947). To be sure, petitioner's liquidation was the objective of its shareholders once that decision was reached in January 1948. Between that time and May 13, 1948, however, its controlling stockholders, owning 75.9 per cent of its outstanding shares, decided that should no bid exceeding $242,080 be made for the noninventory assets at the auction, they would purchase those assets for that sum and utilize them in the business of a newly organized corporation. To effect the purchase, they immediately undertook the organization of Old Peoria, all of whose stock they owned. Issuance of the charter was delayed until June 5, 1948, because the name originally selected was not available. Hence, at the auction on May 20, Silberstein bid in the property at the agreed-upon price for his "nominee or nominees," but Old Peoria paid petitioner, assumed outstanding mortgages and taxes, and took title in its name. It thereafter held the property, and, pursuant to the powers granted it by its charter, has rented various parts thereof to some 20 or 25 tenants. It was still a going concern at the date of the hearing.

Whatever tax-saving motives may have prompted the controlling stockholders here are unimportant; what they did was to effect a reorganization of petitioner through Old Peoria. Cf. Gregory v. Helvering, 293 U. S. 465 (1935). It is unimportant, contrary to petitioner's contention, that the business carried on by the new corporation is different from that carried on by the old. Ernest F. Becher, 22 T. C. 932 (1954), on appeal (C. A. 2, October 8, 1954); Morley Cypress Trust, Schedule "B", 3 T. C. 84 (1944). Old Peoria, in fact, possessed the necessary powers to own and operate a distillery; it also had the authority to carry on a real estate business, which it did; and all powers possessed by it were perpetual.

United States v. Arcade Co., supra, and Charles R. Mathis, Jr., supra, cited by petitioner, are clearly distinguishable because in both cases, as the court said in United States v. Arcade Co., 203 F. 2d, page 233,

When the old corporation was dissolved and the assets were transferred to its former stockholders, there was a break in the continuity of ownership * * Here, there was no break; and the transfer from petitioner to Old Peoria is further to be distinguished from instances where the transfer of property from one corporation to another was truly and solely incident to the liquidation of the old corporation. Cf. Standard

330500m-56-14

Realization Co., 10 T. C. 708 (1948), where the new corporation was organized only to assist in liquidating the old corporation's assets, and, once that had been accomplished, was dissolved, in fact, prior to the old corporation.

The case here closely parallels the situation before us in Ernest F. Becher, supra. In both instances, the old corporation decided to liquidate because of unfavorable postwar conditions; thereafter, but prior to final dissolution, the controlling stockholders decided to acquire a part of the old corporation's assets and formed a new corporation to effect the transfer; thereafter the old corporation was dissolved, and the new corporation continued to carry on a business different from that of the old. We held there and so hold here that the result of the various steps was conclusive evidence that the transfer of property from the old corporation to the new was pursuant to a plan of reorganization within the meaning of section 112 (g) (1) (D); and, under section 112 (b) (3), no loss is recognized on the sale of petitioner's assets to Old Peoria. Walter S. Heller, 2 T. C. 371 (1943); affd. 147 F. 2d 376 (C. A. 9, 1945); certiorari denied 325 U. S. 868 (1945).

Decision will be entered for the respondent.

FORT WHARF ICE COMPANY, PETITIONER, v. COMMISSIONER OF OF INTERNAL REVENUE, RESPONDENT.

Docket No. 45937. Filed October 29, 1954.

On November 15, 1945, petitioner entered into a lease for 10 years beginning July 1, 1946. There was no provision for extension or renewal of the term. Buildings and equipment erected are to pass to lessor at the end of the lease. Buildings and equipment worth $565,221.90 were erected and placed on the leasehold. Held, petitioner is entitled to amortize its cost over the period of the lease despite the identity of corporate officers in the participating corporations.

Harry Bergson, Esq., for petitioner.

Paul M. Henry, Esq., for the respondent.

The Commissioner has determined deficiencies in the income tax of

The sole issue to be decided is whether the petitioner is entitled to amortize the cost of buildings and equipment over the life of a nonrenewable lease or only to a deduction for depreciation based on the useful life of the improvements.

FINDINGS OF FACT.

The facts were all stipulated, are so found, and are incorporated herein by this reference.

Fort Wharf Ice Company (hereinafter referred to as Fort Wharf) is a Massachusetts corporation. It keeps its books and reports its income on the accrual method of accounting. Petitioner filed its income tax returns for the taxable years ended March 31, 1948, 1949, and 1950 with the collector of internal revenue for the district of Massachusetts.

In 1945 there was an economic need in the city of Gloucester, Massachusetts, for an artificial icemaking plant of the size and type later built by the petitioner. The commercial fishing fleet of Gloucester needs crushed ice for its operations. Certain companies, to be described more fully hereafter, related to the fishing industry (or, whose success and continued operation depended on the fishing fleet), joined to meet this need by the formation of the petitioner.

In October 1945 an application for a loan of $300,000 was filed with the Reconstruction Finance Corporation (hereinafter called R. F. C.) on behalf of the proposed Fort Wharf Ice Company for the erection of an artificial icemaking plant.

Fort Wharf was organized October 26, 1945, for the purpose of manufacturing and selling artificial ice in Gloucester. Two thousand and five hundred shares of $100 par value capital stock were issued for cash to the following corporations:

The subscribing corporations made their purchases of stock of the petitioner subject to two special conditions. First, sums charged by petitioner for amortization of its leasehold and for depreciation of plant and machinery were to be set aside in a special fund. This fund was to be used to pay all principal on any mortgage incurred in building and equipping the plant; and thereafter was to be used to retire the capital stock on a ratable basis. Secondly, the shares origi

nally purchased were to be retired 10 years from the date of purchase. The stock was issued October 31, 1945.1

Marine Vitamin Products Company and Gloucester Dehydrating Process Company were Massachusetts corporations engaged in manufacturing fish byproducts from fish cuttings and fish waste. They were located in Gloucester. Both corporations were wholly owned subsidiaries of Dehydrating Process Company (hereinafter called Dehydrating). Dehydrating is a Massachusetts corporation organized in 1927. It is engaged in manufacturing fish byproducts.

Both subsidiaries transferred all of their assets to Dehydrating on December 28, 1946.

Gloucester Ice & Cold Storage Company (hereinafter identified as Cold Storage) is a Massachusetts corporation organized in 1938 and located in Gloucester. It operates a storage and fish-freezing plant.

Cape Pond Ice Company (hereinafter called Cape Pond) is a Massachusetts corporation organized in 1902 and located in Gloucester. In 1945 and years prior thereto it was engaged in the business of harvesting and selling natural ice, chiefly to the fishing fleet. It owned several ponds and ice houses located on the shores of these ponds. It also owned a wharf on Commercial Street, Gloucester, situated on the waterfront. There was a storage crusher plant on the wharf for furnishing crushed ice to the fishing boats.

By direction of its Board of Directors, the undersigned hereby subscribes for two hundred fifty (250) shares of your common stock, totalling $25,000.00, upon the following terms and conditions, namely: that all sums charged by you in your operations either for amortization of your leasehold or for depreciation of your plant and machinery shall constitute a particular fund out of which to pay first, all principal payments on any mortgage given by you for the purpose of erecting your plant, and the balance to be used for the retirement of your outstanding capital stock on a ratable basis; and upon the further consideration that within ten years from the date hereof, you will retire the shares hereby subscribed for.

Nothing in the foregoing shall be construed as affecting the undersigned's right to receive dividends from time to time out of the net earnings of the company or to receive its proportionate share of the net earnings accrued at the time its stock has been fully retired.

Very truly yours,

Accepted:

FORT WHARF ICE COMPANY

By JOHN RYAN

President.

GLOUCESTER DEHYDRATING PROCESS CO.
By: JAMES A. RYAN
Treasurer.

The officers and directors of the stockholder companies during 1945

The officers of these corporations were the same throughout the years in question and they were also directors during these years. There were some changes among the other directors.

John Ryan and his wife, Mary T. Ryan, Samuel L. Deitsch and his wife, Frances Deitsch, Harry Bergson and his wife, Augusta Bergson, and the Gloucester Ice & Cold Storage Company held stock in Dehydrating, Cape Pond, and Cold Storage as listed below. The total number of shares outstanding of each company is also shown:

1 Dehydrating Process Company had a total of 32 shareholders. Cape Pond Ice Company had a total of 9 shareholders.

• Gloucester Ice & Cold Storage Company had a total of 61 shareholders.

In November 1945 Cold Storage, which had subscribed for $125,000 worth of stock in the petitioner, raised $100,000 of this amount by selling its 7 per cent 10-year debentures to its stockholders.

On November 9, 1945, Fort Wharf entered into a contract with Cape Pond, by the terms of which Fort Wharf agreed to manufacture artificial ice exclusively for Cape Pond, which, in turn, agreed to purchase a minimum of 50,000 tons per year. Cape Pond received the use of the crushers and chutes to be constructed by Fort Wharf, free of charge. The price of ice was set at $3.25 per ton. The contract was to run for 10 years from the start of operations.

Fort Wharf leased land from Cape Pond on November 15, 1945. The term was for 10 years beginning July 1, 1946. No provision was made for renewal or extension of the stated term. Rent was set at $100 per month. By express terms of the lease, title to the buildings