Omaha Nat. Bank v. Commissioner (75 F.2d 434, 1935)

SANBORN, Circuit Judge.

This is a petition to review an order of the Board of Tax Appeals redetermining a deficiency in the income taxes of F. J. Farrington for the year 1928. 29 B. T. A. 817, Mr. Farrington (who will be referred to as the taxpayer) died in 1932, and the petitioners are the executors of his estate. The facts out of which this controversy arises are, stipulated. There is virtually no dispute as to the applicable law. The question is whether, in the year 1928, the taxpayer realized a taxable gain of $7500 or of $59,-568.75, as the result of receiving 150 shares of the capital stock of Deere & Co.

For some twenty-nine years before his death, the taxpayer was the branch manager of Deere & Co. at Omaha, Neb. His employment was continuous. From November 1, 1911, until the 150 shares of stock were delivered to him in 1928, he had the right to purchase 500 shares of the stock of the company at $50 a share. Prior to April 8, 1918, this right was represented by written contracts and by notes given for the stock. It is not necessary to describe these contracts in detail. Undoubtedly he had been accorded this right of purchase because he was a valued employee of the company and it wished to retain his services. On April 8, 1918, a new contract for the purchase of stock was entered into by the taxpayer and the company, which, by its terms, superseded all previous agreements relative to the purchase of stock. By the terms of this contract, he was to buy, and the company was to sell to him, 500 shares of stock at $50 a share. The company was to credit upon the purchase price a