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pose overlooks the necessity of ascertaining the basic object for which such maintenance and expansion is undertaken.

If the earnings were being reinvested with a view to increasing profits which would eventually become separated from the business and find their way as income to private interests, it might be possible to arrive at the conclusion that the exemption should be denied. But the record is clear and uncontradicted that, as the petitioner is organized and as it is operated, that result is impossible. The figures indicate that operations as a whole have up to now been conducted at a loss, so that apparently profitable years merely make good the deficits of others. But if we speculate that in the future over-all profits may arise, the facts as demonstrated by the record leave only two possibilities open. Either these profits can be devoted to an amplified pursuit of petitioner's basic purpose, possibly by reducing the amount or value of commercial time in favor of educational programs, in which event there would be no profit in the tax sense and the subordination of the commercial to the welfare object would require our recognition, Trinidad v. Sagrada Orden de Predicadores, 263 U. S. 578; or the proceeds would pass to the organization which the prevailing opinion views as the one who "owns petitioner's shares," which, being itself exempt, would then endow petitioner with a corresponding immunity. Roche's Beach, Inc. v. Commissioner (C. C. A., 2d Cir.), 96 Fed. (2d) 776. In neither event could the proceeds possibly inure to private profit. Indeed, even though the modifying language appearing in some other subdivisions prohibiting "the benefit of any private shareholder or individual" were applicable here, which it is not, petitioner's exemption, would, it seems to me, remain inescapable.

In Roche's Beach, Inc. v. Commissioner, supra, the commercial operation of a bathing beach was found to be exempt as a consequence of the devotion of its proceeds to the charitable foundations established in the will of its former owner. Declaring that "the destination of the income is more significant than its source," the court further characterized as "too narrow a view" the "theory that the stated purposes for which a corporation is organized are to be found in its charter." If in addition to the charitable destination of the bathing beach proceeds the ultimate aims of the commercial corporation itself had been to provide beach facilities to the poor without charge, and it had used its commercial income only for improving its facilities, increasing its own charitable operations, and furthering the charitable work of the foundations, the case would obviously have been more favorable to that petitioner. Yet, in principle, that is the situation we have here,

Anderson Country Club, 2 T. C. 1238, involved an organization apparently dedicated to the development of physical rather than mental

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benefits. Arguments were made there by respondent similar to those advanced here. We said:

Respondent feels that the enhancement of the club's facilities, the retirement of its indebtedness, and the possibility of gain upon dissolution by reason of the receipt and application of the profits to such uses require us to hold that the profits inured to the benefits of the shareholders [who were private individuals]. No authorities are cited to that effect. The record shows that no dividends were ever paid to the shareholders and that dissolution has not been and

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such advantages as these do not constitute the profits inuring to the benefit of a private shareholder, within the meaning of the statute.

I am at a loss to see how the development of this radio station for the greater and more effective presentation of programs of social benefit can be the kind of profit which the statute presupposes. Under circumstances much less favorable the exemption has been granted. Garden Homes Co. v. Commissioner (C. C. A., 7th Cir.), 64 Fed (2d) 593; Anderson Country Club, supra; Roche's Beach, Inc. v. Commissioner, supra. Equal treatment of taxpayers similarly situated seems to me to require it here.

KERN, J., agrees with this dissent.

SEWELL L. AVERY, PETITIONER, V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 112526. Promulgated June 6, 1944.

1. Taxpayer created two trusts, one for each of his two daughters and the husband of each, and transferred to each trust 13,000 shares of Montgomery Ward & Co. stock and 8,000 shares of United States Gypsum Co. stock. Held, four gifts of 6,500 shares of Montgomery Ward stock and 4,000 shares of Gypsum stock were made. Helvering v. Hutchings, 312 U. S. 393; United States v. Pelzer, 312 U. S. 399.

2. The values of such blocks of stock determined.

Leland K. Neeves, Esq., for the petitioner.

Gerald W. Brooks, Esq., and Frank T. Donahoe, Esq., for the respondent.

The respondent determined a deficiency of $22,258.49 in the gift tax of the petitioner for the year 1940.

The sole issue is the proper valuation of certain shares of the common stock of Montgomery Ward & Co. and United States Gypsum Co. which on December 31, 1940, were transferred as gifts under trust agreements.

FINDINGS OF FACT.

Certain facts were stipulated and as so stipulated are adopted as findings of fact. They are set forth in great detail in the stipulation,

but may be summarized as follows, all other facts and figures therein being incorporated by reference.

The petitioner is an individual residing in Evanston, Illinois, and maintains his office in Chicago. He filed his gift tax return for the year 1940 with the collector of internal revenue for the first district of Illinois.

On December 31, 1940, the petitioner made gifts of 8,000 shares of the common stock of the United States Gypsum Co., an Illinois corporation, hereinafter called Gypsum, and 13,000 shares of the common stock of Montgomery Ward & Co., an Illinois corporation, hereinafter called Ward, to the Northern Trust Co. of Chicago, Illinois, and Hortense Wisner Avery, as trustees, to hold in trust for the use and benefit of the petitioner's daughter, Nancy Avery Follansbee, and her husband, Rogers Follansbee, and others.

On December 31, 1940, and contemporaneously with the above gift, the petitioner made gifts of 8,000 shares of the common stock of Gypsum and 13,000 shares of the common stock of Ward to the Northern Trust Co. of Chicago, Illinois, and Hortense Wisner Avery, as trustees, to hold in trust for the use and benefit of the petitioner's daughter, Arla Avery McMillan, and her husband, William Benton McMillan, and others.

In the petitioner's gift tax return for the year 1940 he reported such gifts as follows:

1..

2

tem No.

Total..

Description of gift, motive and donee's name and address

8,000 shares United States Gypsum Co. common stock, 13,000 shares
Montgomery Ward & Co. common stock; the Northern Trust Co.
and Hortense Wisner Avery, co-trustees, under agreement with
Sewell L. Avery, dated Dec. 31, 1940, for the benefit of Arla Avery
McMillan and William Benton McMillan and others, 50 S. La-
Salle St., Chicago.

8,000 shares United States Gypsum Co. common stock, 13,000 shares
Montgomery Ward & Co. common stock; the Northern Trust Co.
and Hortense Wisner Avery, co-trustees under agreement with
Sewell L. Avery, dated Dec. 31, 1940, for the benefit of Nancy
Avery Follansbee and Rogers Follansbee and others, 50 S. La-
Salle St., Chicago.

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A notation was made in a blank space under schedule B of the said return, otherwise unused, reading as follows:

Note: In view of the number of shares involved the market quotations on December 31, 1940 were not indicative of the actual values. The values, as stated above, are as follows-United States Gypsum Company at 622, Montgomery Ward & Co. at 36. These values are 2 points and 12 points, respectively, below the mean market quotations for December 31, 1940.

Prior to making the gifts the petitioner held the shares of stock of the corporations for investment. None of the shares of stock have been sold by the donees thereof and the donees have held such shares of stock for investment since the date of the gifts.

For many years prior to and including the year 1940 Ward published detailed annual reports, which included statements of its properties, financial status, activities, earnings, and dividends. Such annual reports were supplemented by reports of quarterly earnings, as the results of its operations became available during each year. These reports were mailed to stockholders, and digests thereof were given wide circulation by publications recognized as authoritative in the investment and financial community. Such publications included the Commercial and Financial Chronicle, Standard Statistics, and Poor's and Moody's Industrial Manuals. Quarterly and annual reports were also published in the Wall Street Journal. The company also filed its annual reports with the Securities and Exchange Commission. During all material times herein the accounting period of Ward was the fiscal year ended January 31 in each year.

The reports of Montgomery Ward & Co. above referred to were substantially accurate. On January 31, 1941, the outstanding common shares (no par) were 5,217,147. On January 31, 1941, there were 59,373 common shareholders. The common shares were listed and traded on the New York and Chicago Stock Exchanges, and also were traded in the unlisted department on the Boston, Detroit, Los Angeles, Philadelphia, Pittsburgh, and San Francisco Stock Exchanges.

The following is a compilation for each month for the period January 1 to December 31, 1940, inclusive, of the recorded number of shares traded, the dates of high prices, high prices, the dates of low prices, and low prices for such period for Ward common stock on the New York Stock Exchange:

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On December 31, 1940, 5,500 shares of Ward were sold, opening at 37% and closing at 38. The high and low on that day were 38 and 37, respectively.

During the year 1940, 963,600 shares of the common stock of Ward were traded on the New York Stock Exchange. A total of 1,234 different issues were traded on that exchange, of which 41 issues exceeded 960,000 shares traded during the year, or 3.2225 percent of the total

number of issues traded. During the year 1941, 797,700 shares were traded. A total of 1,234 different issues were traded in 1941 on the New York Stock Exchange, of which 37 issues exceeded 795,000 shares traded during the year, or 2.99837 percent of the total number of issues traded.

For many years prior to and including the year 1940 Gypsum published detailed annual reports, which included statements of its properties, financial status, activities, earnings, and dividends. Such annual reports were supplemented by reports of quarterly earnings, as the results of its operations became available during each year. These reports were mailed to stockholders, and digests thereof were given wide circulation by publications recognized as authoritative in the investment and financial community. Such publications included the Commercial and Financial Chronicle, Standard Statistics, and Poor's and Moody's Industrial Manuals. Quarterly and annual reports were also published in the Wall Street Journal. The company also filed its annual reports with the Securities and Exchange Commission. During all material times herein the accounting period of United States Gypsum Co. was the calendar year.

The reports of Gypsum above referred to were substantially accurate. On December 31, 1940, the outstanding common shares (par $20) were 1,195,662, exclusive of 56,159 shares of treasury stock, of which 5,476 shares are under option to officers and managers. On December 31, 1940, there were 7,044 common shareholders. The common shares were listed and traded on the New York and Chicago Stock Exchanges, and also were traded in the unlisted department on the Philadelphia Stock Exchange.

The following is a compilation for each month for the period January 1 to December 31, 1940, inclusive, of the recorded number of shares traded, the dates of high prices, high prices, the dates of low prices, and low prices for Gypsum common stock on the New York Stock Exchange:

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