ical School of Chicago, an Illinois corporation organized for profit, of the par value of $11,000, for which he paid par.

On March 31, 1922, the corporation had more than seventy stockholders, its officers on that date being Dr. William L. Baum, president; Dr. Emil Ries, vice president; Dr. H. L. Meyers, secretary; and Dr. A. A. Goldsmith, treasurer.

On March 31, 1922, another Illinois corporation, not for profit, was organized, known as Post Graduate Hospital and Medical School, its object being, as follows:

To conduct a Post Graduate Hospital and any other hospital that may come under the management of the corporation; to conduct post graduate teaching of medicine in all its branches; to conduct one or more dispensaries with the necessary drug dispensaries; to conduct a training school for nurses; to conduct all laboratories necessary for the purposes of hospital and school; including anatomical, X-Ray, chemical, pathological, and similar laboratories.

The by-laws of this latter corporation adopted March 31, 1922, among other things provided that membership in the corporation should consist of the persons named in the charter as directors and such other persons who shall be elected by the directors, who possessed the power by resolution to designate the qualifications of membership in the corporation. The by-laws further provided that the membership should be personal and should terminate with the death of such member; that a member might resign but that such resignation would create no vacancy in the membership; that there should be no limit to the number of members and each member should have the right to attend all meetings and cast one vote thereat.

Upon the organization of said corporation, March 31, 1922, and thereafter, the following named persons were the sole members of the corporation:

The Post Graduate Hospital and Medical School, in order to acquire a hospital and medical school for carrying on its objects, on March 31, 1922, by proper resolution of its members, authorized a proposal to purchase of the Post Graduate Medical School of Chicago "its equipment and all property rights, contracts and undertakings and engagements" and to pay therefor $23,000, to be evidenced by debenture bonds due on or before 20 years afterward, with interest at 5 per cent per annum, payable semiannually.

On April 11, 1922, the authorized proposition was submitted to a special meeting of the stockholders of the Post Graduate Medical

School of Chicago, which passed resolutions accepting the same and stating therein, among other things, as reasons for so doing, that: WHEREAS, the function of the Post Graduate Medical School is the teaching of medicine to graduates in medicine and the fostering of research and investigation, and,

WHEREAS, the function of the Post Graduate Medical Hospital is the care of the sick and the study and improvements of methods of treatment, and, WHEREAS, these functions are not, cannot be and should not be carried out as a dividend paying business, but are a distinct service to science and the community and as such needed by and useful to the community, and therefore worthy of and entitled to the support of the community, and,

WHEREAS, the stockholders of the Post Graduate Medical School of Chicago recognize the above statements as true and are willing and anxious to sacrifice considerable parts of their moneys invested in stock of the Post Graduate Medical School of Chicago, for the purpose of increasing its usefulness and improving its standing,

Resolutions were also passed authorizing the officers to execute all necessary instruments to convey its assets to the Post Graduate Hospital and Medical School and directing, upon consummation of the sale, that possession of the property of the Post Graduate Medical School be delivered to the Post Graduate Hospital and Medical School "upon receiving the notes" of the latter, which notes when received were to be held "in the Company's treasury to abide the further action of the board of directors of the Company." Thereafter (the evidence does not disclose the date) proper instruments of transfer were executed by the Post Graduate Medical School of Chicago, conveying all its property and assets to the Post Graduate Hospital and Medical School, possession thereof being also given. and in full payment therefor the Post Graduate Medical School of Chicago received from the other corporation its 5 per cent debenture bonds of the face value of twenty-three thousand dollars. The evidence does not show how or from what source said bonds were payable.

On June 15, 1922, at a special meeting of the directors of the Post Graduate Medical School of Chicago, a resolution was adopted (authority being given therefor by the stockholders) directing that the $23,000 of "notes " or debenture bonds (the consideration for said transfer) be distributed to the stockholders of the Post Graduate Medical School of Chicago, ratably and in proportion to their holdings of stock in the company. Thereupon, the directors of the Post Graduate Medical School of Chicago unanimously adopted resolutions, reciting it had no assets of any kind, having sold all its physical property and distributed the proceeds thereof among its stockholders, and directing that it be dissolved and its charter surrendered and that certificate of dissolution be filed in the office of the Secre

tary of State at such time as the officers of the corporation should determine for its best interests. Thereafter, in 1922, a dissolution certificate was duly executed and filed with the Secretary of State of Illinois and other action taken in accordance with the statutes of Illinois, resulting in the Post Graduate Medical School of Chicago ceasing to exist in that year.

In accordance with the provisions of the resolution of June 15, 1922, passed by the board of directors of the Post Graduate Medical School of Chicago, the $23,000 of 5 per cent debenture bonds were in 1922 duly and ratably distributed to its stockholders, the petitioner herein receiving bonds of the face value of $3,666.66. Petitioner gave to the Post Graduate Hospital and Medical School 5 per cent debenture bonds aforesaid to the face value of $2,233.33 for the purpose of furthering the scientific work of such corporation and in order to reduce its interest-paying charges.

The Commissioner disallowed $7,333.33 claimed as a loss by petitioner in his income-tax return for 1922, being the difference between the par value of the stock of the Post Graduate Medical School of Chicago originally owned by him and the face value ($3,666.66) of said 5 per cent debenture bonds received by him as stated above.

The stockholders in the Post Graduate Medical School of Chicago held stock therein of a total par value of $69,000 and when the Post Graduate Hospital and Medical School acquired the assets of the former corporation the stockholders thereof received therefor the aforesaid debenture bonds of the face value of $23,000.

The Post Graduate Hospital and Medical School of Chicago had a different staff of officers from the original or first corporation.

The value of the buildings of the Post Graduate Medical School of Chicago as shown by its return for 1922 was $111,795.85, with a total depreciation of $18,216.17 for previous years and $2,235.92 for that year. For the year 1919 the net income of the Post Graduate Medical School of Chicago as reported for Federal tax purposes was $3,606.62, after repairs of $3,356.76 had been made; for the year 1920 the net profits for such tax purposes so reported were $2,391.89, after $6,241.61 repairs had been made; and for 1921 said profits were $3,643.46, after $4,467.42 repairs were made.

The Post Graduate Medical School of Chicago, organized and operated as a profit-making corporation, ceased to exist as such because not very successful and desiring to escape the payment of taxes. The Post Graduate Hospital and Medical School which succeeded it and acquired all its assets was organized and operated as a nonprofit-making corporation, exempt from Federal taxes. Both corporations were organized and operated largely for the same objects and purposes.

The return filed by the Post Graduate Medical School of Chicago for the calendar year 1922 was made for both corporations, it being stated therein: "This company was succeeded April 1, 1922 by the Post Graduate Hospital and Medical School, an Illinois corporation organized not for pecuniary profit. The books of the two companies reflect a continuity of ownership and control and in this return the gross income has been prorated between the two companies." The return is duly signed and sworn to by the president and treasurer of the corporation.

No dividends were ever declared or distributed to the stockholders of the Post Graduate Medical School of Chicago, all monies made by the corporation being immediately put into the plant for repairs, etc. No attempt was made to sell its property to any person or corporation other than the Post Graduate Hospital and Medical School which acquired the same in the manner stated. There was, at the time of the transfer of the property, a first mortgage of about $16,000 thereon.

The then fair market value of the property of the Post Graduate Medical School of Chicago, or what such might have been sold for, the evidence does not disclose. The property, however, had depreciated in value.

What was the fair market value, if any, of the debenture bonds at the time received by the petitioner is not shown, though their maximum value was not more than their face amount.

The fair market value on March 1, 1913, of petitioner's stock in the Post Graduate Medical School is not in evidence.

OPINION.

SEAWELL: The evidence shows there were two corporations organized largely for the same purposes. The Post Graduate Medical School of Chicago, herein termed the first corporation, was organized as a profit-making corporation. The second corporation, the Post Graduate Hospital and Medical School, was organized as a nonprofit-making corporation.

The record shows the first corporation was not operated very successfully and on that account and to escape payment of taxes, which as a corporation for profit it had to pay, it was deemed advisable to organize another corporation, a nonprofit-making corporation which would acquire the property of the first, and to dissolve the first corporation.

Resolutions passed by the stockholders of the Post Graduate Medical School of Chicago stated that they were "willing and anxious

to sacrifice considerable parts of their moneys invested in stock of such school" for the purpose of increasing its usefulness and improving its standing " and were, therefore, ready to accept and did accept the proposition made by the Post Graduate Hospital and Medical School, which resulted in the stockholders of the first corporation, holding $69,000 of its stock, receiving therefore $23,000 of debenture bonds of the latter corporation, the petitioner herein receiving for his stock in the first corporation, which stock cost him $11,000, de-. benture bonds of the second corporation of the face value of $3,666.66. Prior to the acceptance of the proposition made the first corporation by the second corporation, there was no attempt made to sell the assets of the first corporation. What might have been realized by such a sale or what was then the value of the stock in such corporation is not shown.

The net result of the transaction is that the petitioner, having before March 1, 1913, purchased shares of the first corporation for $11,000, received in 1922 a liquidation thereof in the form of debentures having a face value of $3,666.66. What their fair market value was at the time of their receipt by the petitioner is not in evidence.

The applicable law in the circumstances of the instant case is the Revenue Act of 1921, which makes it necessary for March 1, 1913, value of the shares of stock in the Post Graduate Medical School of Chicago, purchased by the petitioner prior to that date, to be shown before any loss can be allowed petitioner because of the receipt by him of debentures of the face value of only $3,666.66. The evidence failing to show the March 1, 1913, value of shares which cost petitioner $11,000, no loss can be reckoned nor allowed. Burnet v. Houston, 283 U. S. 233.

If the petitioner's shares on March 1, 1913, were worth not more than $3,666.66 (the maximum value of the debentures he received) he would have no recognizable gain or loss. United States v. Flannery, 268 U. S. 98; McCaughn v. Ludington, 268 U. S. 106.

In view of the fact that the March 1, 1913, value of petitioner's shares is not in evidence, it is unnecessary to discuss or decide whether there was in law a reorganization or an exchange.

The Commissioner determined there was no loss and there is no evidence adduced overcoming the presumption of the correctness of such determination. Such determination is, therefore, approved. As to the deficiencies for both years, 1922 and 1923,

Judgment will be entered for the respondent.