Pendleton communicated this offer to Lewis, who told him that the offer was unsatisfactory; that he should try to get a better offer; and that they were not in a position to sell the Maine because title to it was then held by Fairfield; and that any sale of the Maine would be made by Atlantic. Pendleton told Lambert that the offer of $ 45 would not be acceptable and Lambert suggested that he would try to get a better offer.

A few days after September 11, 1940, Rees orally renewed the offer for the Maine on behalf of the British Ministry at $ 47.50 per deadweight ton, subject to the same conditions. Lambert conveyed this second offer to Pendleton, who reported it to Lewis. Pendleton and Lewis decided to try to get more than $ 47.50 for the Maine. Pendleton thereupon told Lambert that the offer was not acceptable and that Lambert should try to get a better price. Lambert asked Pendleton to make a counteroffer, but Pendleton replied that they would not be in a position to make any counteroffer until certain formalities in 5 T.C. 566">*570 the office took place. The declination1945 U.S. Tax Ct. LEXIS 106">*114 of this offer was communicated to Rees.

On September 18, 1940, Rees orally made an offer through Lambert for the Maine at $ 50 per deadweight ton on the condition that a reply be received not later than 5 p. m. on September 18, 1940. Lambert orally communicated the offer to Pendleton, who relayed it to Lewis without advising the latter of the time limit. Lewis told Pendleton that the price was all right, but that the sale of the vessel would not be accomplished until after September 19, 1940, on which day appropriate corporate action would be taken by the stockholders of Atlantic and Fairfield to effect a transfer of title to the Maine from Fairfield to Atlantic. Pendleton told Lambert that the offer would be acceptable, but that nothing could be done until the vessel had been transferred to Atlantic, as he was not authorized to accept on behalf of Fairfield. Lambert, prior to 5 p. m. on September 18, 1940, advised Rees that the offer was accepted. Also, on September 18, 1940, Rees received a cable from London which read in part as follows:

You may negotiate Maine but as vessel apparently closed shelter deck consider fifty dollars excessive and forty-seven point fifty1945 U.S. Tax Ct. LEXIS 106">*115 should be equivalent to this type of vessel.

Rees replied to that cable the night of September 18, 1940, as follows:

Maine: were under offer at $ 50 prior receipt your 1021 [reference is to cable quoted above] which owners have accepted * * * expect delivery Baltimore early October period.

On September 18, 1940, and until after her return to the port of New York on September 20, 1940, the Maine was under voyage charter from Fairfield to Seas. Rees did not have any information as to who the corporate owner of the Maine was, except the information contained in Lloyd's Register, and was not concerned with that fact, knowing that the Maine was one of the Arthur Lewis ships and believing that Lambert, as a responsible broker, had the necessary permission to deal with the British Ministry of Shipping. Lambert had inquired of Lewis in 1936 and 1937, and earlier, whether he would sell the Maine, and had been told that if he brought in a sufficiently high offer, anything would be sold.

On September 19, 1940, at 3 p. m., a special meeting of the stockholders of Atlantic was held and the following resolution was passed:

Resolved, that the Atlantic Coast Shipping Company, Incorporated, 1945 U.S. Tax Ct. LEXIS 106">*116 as sole holder of all the issued and outstanding stock of the Fairfield Steamship Corporation, cause a certificate of dissolution of the Fairfield Steamship Corporation to be executed and filed. That the Atlantic Coast Shipping Company, Incorporated, surrender to the Fairfield Steamship Corporation all of the stock of the Fairfield Steamship Corporation in exchange for the transfer to the Atlantic Coast Shipping Company, Inc. of the steamship Maine, and all other property, tangible and intangible, of the Fairfield Steamship Corporation; * * *

5 T.C. 566">*571 This meeting was recessed and thereupon on the same day at 3:30 p. m., a special meeting of the stockholders of Fairfield was held and the following resolution was passed:

Resolved, that Arthur R. Lewis, Jr., President of Fairfield Steamship Corporation, be, and he is hereby authorized to take all necessary steps to sign all necessary certificates and instruments in order to carry out and effectuate the dissolution of the Fairfield Steamship Corporation, and the transfer of all of its assets to the Atlantic Coast Shipping Company, Incorporated, in exchange for all of the outstanding stock of Fairfield Steamship Corporation; * * *

1945 U.S. Tax Ct. LEXIS 106">*117 This meeting was followed by a meeting of the board of directors of Fairfield held on the same day at 4 p. m., and the resolutions of the stockholders of Atlantic and of Fairfield were incorporated in the minutes of the meeting of Fairfield's board of directors. The board of directors also passed a resolution in the same terms as that passed by Fairfield's stockholders quoted above. Finally, the recessed meeting of Atlantic's stockholders was reconvened at 4:15 p. m. on the same day and the following resolutions were passed:

Resolved, that the President, Arthur R. Lewis, Jr., be, and he hereby is authorized to negotiate a contract for the sale of the ss Maine, to a prospective British purchaser, at a purchase price of $ 50. per deadweight ton; and it is further

Resolved, that the President, Arthur R. Lewis, Jr., in the event that it is possible to negotiate and conclude such a contract for the sale of the ss Maine, be and he hereby is authorized and directed to sign and execute all necessary papers to obtain permission from the United States Government to sell the vessel with transfer of flag to British registry, and to execute and sign any and all necessary papers to carry out1945 U.S. Tax Ct. LEXIS 106">*118 such a sale and transfer of the ss Maine; * * *

The purchase money in connection with the sale of the Maine was furnished by the British Government, which appointed a nominee to take title to the ship and operate it for the British Government rather than to take title to it itself, because the United States was not then at war.

On September 21, 1940, Rees received a cable from London in which Glover Brothers (London), Ltd., was nominated to take title to the Maine. Lambert was orally advised of this on the same day. On September 24, 1940, Lambert received written confirmation of this from the British Ministry and sent a copy of this letter to Pendleton. In the meantime, on September 23, 1940, Lewis, as president of Fairfield, executed a bill of sale of the Maine to Atlantic, which bill of sale was recorded at the Customhouse in Baltimore, Maryland, on September 26, 1940. Atlantic never owned any ships prior to its acquisition of the Maine; it was in the stevedoring business.

On September 30, 1940, a written contract for sale of the Maine was entered into between Atlantic and Glover Bros. at Jersey City, New Jersey. This contract was signed by Lewis, as president, 1945 U.S. Tax Ct. LEXIS 106">*119 on behalf of Atlantic, and by Hugh Reid, as attorney in fact, on behalf of Glover Bros. Reid's authority to act on behalf of Glover Bros. was 5 T.C. 566">*572 received by cable from London about the same time that Glover Bros. was nominated as the purchaser of the Maine. The contract contained the same conditions as those specified in connection with the original offer. A deposit of $ 47,660 was paid upon its execution. The contract contained, inter alia, the following clause:

9. The Buyer shall not be obligated to accept delivery hereunder unless the United States Maritime Commission shall have approved the sale of the vessel to the Buyer and her transfer to British registry without any conditions imposed on either the Buyer or the Seller other than the usual conditions that the vessel shall be free of liens and encumbrances at the time of the sale. * * *

On October 2, 1940, Reid advised Atlantic by letter on behalf of Glover Bros. that they had accepted the afloat inspection and the dry dock inspection of the Maine (conditions in the formal contract of sale), and on October 3, 1940, the sale and transfer to the British registry and flag of the Maine was approved by1945 U.S. Tax Ct. LEXIS 106">*120 the United States Maritime Commission, subject to the condition (acceptable to the buyer) that the Maine would not be used for a belligerent purpose or be made into a vessel of war.

On October 8, 1940, a special meeting of the board of directors of Atlantic was held and the following preamble and resolution was unanimously adopted:

Whereas, the stockholders of the Atlantic Coast Shipping Company, Incorporated, did heretofore, and on the 19th day of September, 1940, authorize the sale of the ss Maine, and by resolution, authorized Arthur R. Lewis, Jr., as President, to enter into a contract for the sale of the ss Maine; and

Whereas, Arthur R. Lewis, Jr., acting as President, did on the 30th day of September, 1940, enter into a contract for the sale of the ss Maine to Glover Brothers (London) Ltd., of Bevis Marks House, London, England;

Now, Therefore, Be It

Resolved, that the act of Arthur R. Lewis, Jr., as President, in executing said contract for the sale of the ss Maine, be and it is in all respects ratified and approved; and it is further

Resolved, that Arthur R. Lewis, Jr., President of Atlantic Coast Shipping Company, Incorporated, be, and he hereby is authorized to execute1945 U.S. Tax Ct. LEXIS 106">*121 and deliver a formal bill of sale, and sign any and all necessary instruments to execute and carry out the sale of the ss Maine to Glover Brothers (London) Ltd.; * * *

Lambert received a commission, which was paid by Atlantic, for procuring an acceptable offer for the vessel.

On December 27, 1940, there was transferred from Fairfield to Atlantic the balance of Fairfield's cash in the amount of $ 107,855.07, and some other debits and credits, all in exchange for all of the outstanding stock of Fairfield. "Atares" wharf was sold by Cuban in 1940 for $ 80,000, less approximately $ 1,400 expenses.

In its 1940 income and declared value excess profits tax return Atlantic reported a long term capital gain of $ 331,726.85 as a result of the sale of the Maine. It also reported a long term capital loss of $ 390,000, based upon the stock it owned in Cuban. Atlantic thus 5 T.C. 566">*573 claimed a total net long term capital loss of $ 58,273.15. The only other income it had for 1940 was interest on loans, notes, mortgages, bonds, bank deposits, etc., in the amount of $ 325, and it had other allowable deductions for 1940, not questioned by the Commissioner, which totaled $ 105,066.49. Fairfield1945 U.S. Tax Ct. LEXIS 106">*122 did not report any gain for Federal tax purposes from the sale of the Maine.

The executed sale of the Maine was in substance the sale of Fairfield.

OPINION.

The first question propounded to us is simple: Was sale of the Maine made by Fairfield, or by Atlantic after acquisition of this ship by liquidation of Fairfield? In our opinion it was made by Fairfield and the agreed gain was properly taxed to that corporation. This conclusion we consider proper under , another effort to shift to stockholders the gain from sale of corporate property. Though recognizing the right of the taxpayer to consider tax consequences, we must and do scrutinize the reality of what happened in the facts presented to us.

The petitioner (with the burden of proof) seeks to establish a lack of connection between what took place while Fairfield owned the Maine and the transfer of the ship after liquidation to Atlantic, along the line of some cases which have recognized such distinction. Thus, the dissent in Court , recognizes that1945 U.S. Tax Ct. LEXIS 106">*123 there may be "complete abandonment by the corporation of its purpose to sell and renewal of negotiations followed by a sale by the stockholders." In , holding the corporation not liable for tax on gain from sale made by its stockholders the court held, to use the words of , "that the acts in that case were unrelated and not part of an anticipatory plan." We may not, however, fairly come to the same conclusion here. Passing over the one change in the contract (clause 9 above set forth in the facts), consisting of a condition imposed by the United States Maritime Commission as to nonbelligerent use of the ship, accepted by both parties, for we consider such change immaterial, the sale effected was in substance that which had been arranged while Fairfield held title to the ship. That there is here involved no sale by Atlantic, unrelated to what had been done by Fairfield, but one "part of an anticipatory plan," is well shown by the fact that when, on September 19, 1940, Atlantic voted to authorize sale of the Maine1945 U.S. Tax Ct. LEXIS 106">*124 , Lewis (who had obtained the offer from the British interests) was authorized to negotiate a contract of sale "to a prospective British purchaser, at a purchase price of $ 50, per deadweight ton; and * * * to sell the vessel with transfer of flag to British registry." Plainly, the sale was no new matter when Atlantic entered the picture.

5 T.C. 566">*574 Petitioner, on brief, points out that Pendleton, instructed by Lewis, advised Lambert, on September 18, that the price "would be acceptable when the vessel was transferred to Atlantic * * *." Though the language goes on to state that Pendleton could not deal with Fairfield, nevertheless it thus appears plain that (except for immaterial details) the offer was satisfactory and would be consummated by sale after a transfer of title. It is noteworthy that previous rejections of offers had been on the ground of price, which price was now satisfactory, showing that a deal had now been agreed upon -- except for acquiring the property from some one else -- indicating, we think, that Atlantic was made a conduit for Fairfield for that purpose.

It is to be noted also that, in the words of petitioner's reply brief, the "$ 50.00 a ton offer was accepted1945 U.S. Tax Ct. LEXIS 106">*125 by Atlantic," following the transfer to it, yet no evidence appears that any offer was ever made to Atlantic, or substantially other than as submitted while Fairfield was holder of title. Atlantic was not in the business of selling ships, but was in the business of stevedoring. In fact, it never, prior to acquisition of the Maine, owned any ship. All of the facts convince us that this is a case of conduit utilized by the original owner, Fairfield, to route the property to the purchaser after an arrangement so complete as to be considered by the purchaser as binding. Under such facts, and after the expression of the Supreme Court in the Court Holding Co. case, ³supra, that lack of execution of contract by the corporation (Fairfield) is unimportant; if the sale was in substance the sale of the corporation (Fairfield), we may not give effect to the contention that no firm offer was accepted by Fairfield. We think it was accepted in substance by Fairfield by its conduit Atlantic, if not earlier. Lewis, the same man who governed the matter in accepting for Atlantic, governed the rejection (in effect only until after the transfer) by Fairfield. Such a rejection 1945 U.S. Tax Ct. LEXIS 106">*126 amounted, in substance, to acceptance, except that another (the conduit or nominee Atlantic) would carry out the agreement. Pendleton's testimony that "the offer would be acceptable when the vessel was transferred to the Atlantic 5 T.C. 566">*575 Coast Shipping Company," even though followed by a statement that the speaker could not deal or accept for Fairfield, in our opinion indicates clearly the unreality in the contention advocated by the petitioner. The transaction was merely, as a matter of form, completed by Atlantic.

1945 U.S. Tax Ct. LEXIS 106">*127 Unreality is further suggested, we think, by the fact that, though Atlantic, under petitioner's theory, received the ship in liquidation on September 23, 1940, and then sold it, the other property, including about $ 107,000 in cash, of Fairfield was not transferred to Atlantic until December 27, 1940, so that the liquidation, and apparently the cancellation of the stock held by Atlantic, was, in fact, not comsummated until that time -- long after disposition of the ship to the British interests. Since, under the provisions of Fairfield's resolution to liquidate, "all of its assets" were to be transferred to Atlantic "in exchange for all the outstanding stock of Fairfield Steamship Corporation," the stock held by Atlantic was apparently not canceled until December 27, 1940, and Atlantic is seen dealing with a ship to which it had not, in fact, acquired a right.

In addition to the above cases, see ; ; affd., ; ; affd., ;1945 U.S. Tax Ct. LEXIS 106">*128 ; affd., ; ; affirming . We consider , distinguishable upon the facts. The New York Statute, section 20, Stock Corporation Law (providing in substance that a stock corporation may sell assets with the consent of the holders of two-thirds of the shares), has no bearing, either in law or logic, upon the power of Fairfield to make the contract. It had only one stockholder. .

We conclude and hold that the Commissioner did not err in adding the profit upon sale of the Maine to the income of Fairfield.

Our decision on the first question renders it unnecessary to consider the second question -- namely, whether the stock of Cuban owned by Atlantic became worthless in 1940 -- because that question is now moot, due to the fact that Atlantic was dissolved in December 1940 and that, with the elimination of the gain derived1945 U.S. Tax Ct. LEXIS 106">*129 from the sale of the Maine from Atlantic's income for 1940, Atlantic's only other income for 1940 ($ 325) is offset by other uncontested deductions for the same period ($ 105,066.49).

Decision will be entered in Docket No. 1471 (Fairfield) for the respondent, and decision of no deficiency will be entered in Docket No. 1472 (Atlantic).