The stock certificates issued to the executors were subsequently endorsed in blank. The certificates were canceled on October 10, 1944, and new certificates were issued thereafter either to the persons or the nominees of the persons who were represented by Stone. They had entered into an agreement with him1950 U.S. Tax Ct. LEXIS 207">*213 dated April 3, 1944, whereby they indicated precisely their subscriptions to the various classes of stock which were subsequently issued by the petitioner. Those parties were not the same as the ten children, sisters, and brothers of Klein mentioned in his will; that is, they did not include three of the latter, but did include nineteen other persons related in some degree to Klein.

Apparently the purchase price was paid.

The Commissioner, in determining the deficiencies, disallowed $ 1,007.13 of a deduction for depreciation claimed in the amount of $ 7,724.36 for the period ended September 30, 1944, thus allowing a deduction of $ 6,717.23, and disallowed $ 5,202.88 of a deduction for depreciation claimed in the amount of $ 20,685.88 for the fiscal year ended September 30, 1945.

The parties have stipulated that the amount allowable as a deduction for depreciation for the period ended September 30, 1944, is $ 7,724.36, "If the acquisition by the corporation of the assets from the executors qualified under Section 112 (b) (5) of the Internal Revenue Code," but the amount is $ 6,717.23 if the basis of the property transferred is its cost to the petitioner.

They have also stipulated 1950 U.S. Tax Ct. LEXIS 207">*214 that the amount allowable as a deduction for depreciation for the period ended September 30, 1945, is $ 22,700.15, "If the acquisition by the corporation of the assets from the executors qualified under Section 112 (b) (5) of the Internal Revenue Code," but the amount allowable is $ 20,685.88 if the basis of the property transferred is its cost to the petitioner.

The Commissioner, in determining the deficiencies, computed the excess profits net income under the invested capital credit method, and he explained that the petitioner did not qualify as an acquiring corporation within the meaning of section 740 and, therefore, was not entitled to have its excess profits credit computed on the basis of income. The amount of the excess profits credit based on income to which the petitioner is entitled for each period if it qualifies as an acquiring corporation under section 740 has been stipulated.

The basis of property for the purpose of computing depreciation deductions is its basis for gain or loss as fixed by section 113. Secs. 23 (n) and 114. The general rule of section 113 is that the basis of 14 T.C. 786">*789 property shall be its cost to the taxpayer. One of the exceptions is that the1950 U.S. Tax Ct. LEXIS 207">*215 basis of property acquired by a decedent's estate from the decedent shall be the fair market value of the property at the time of that acquisition. Sec. 113 (a) (5). That gives the property in the hands of the executors a basis equal to the value at which it was included in the decedent's gross estate for estate tax purposes. See section 811. The property here in question was acquired by the estate of Samuel Klein, represented by his executors, from Samuel Klein at the time of his death. The basis of that property in the hands of the executors was thus its fair market value at the date of the death of Klein. The petitioner acquired the property from the Klein estate.

Property in the hands of a corporation retains the same basis as it had in the hands of the transferor if the transfer was one coming within section 112 (b) (5). That provision is entitled "Transfer to Corporation Controlled by Transferor" and covers a transfer of property by one or more persons to a corporation solely in exchange for stock or securities in such corporation where, immediately after the exchange, the transferors are in control of the corporation. The petitioner, relying upon those provisions, claims1950 U.S. Tax Ct. LEXIS 207">*216 that it is entitled to use, as its basis for depreciation of certain of its property, the basis which that property had in the hands of the Klein executors.

The theory of the petitioner is that the executors transferred property to it solely in exchange for stock or securities of the petitioner and immediately after the exchange the executors were in control of the petitioner. Control in this connection means the ownership of stock possessing at least 80 per cent of the total combined voting power of all classes of stock entitled to vote and at least 80 per cent of the total number of shares of all other classes of stock of the corporation. Sec. 112 (h). The agreement between Stone and the executors seems to have provided that only 4,000 shares of class A stock were to be issued, those shares were to be issued to the executors, and the executors would then transfer them to Stone. The next step apparently was for Stone, then being in control of the corporation, to have it issue its other shares in accordance with the agreement of the subscribers dated April 3. However, the petitioner actually issued more than 4,000 shares to the executors, but this deviation from the agreement1950 U.S. Tax Ct. LEXIS 207">*217 and the question of what happened to the debentures have no particular significance in the decision of this case.

The circumstance fatal to the contention of the petitioner is that the petitioner was organized, the Klein property was transferred to it, and its shares issued, all in accordance with a bid made by Stone and to carry out an agreement between the executors and Stone, representing himself and others. That plan and agreement was obviously not complete until the executors transferred the stock to Stone, or to 14 T.C. 786">*790 Stone and his associates. Ownership of the stock of the petitioner was in the executors in name only, and that temporarily, as a mere intermediate step in an integrated plan under which they were required, from the very beginning, to transfer the stock to the purchasers or their representative, who had already paid $ 200,000 on account of the purchase price at the time the petitioner was organized. The variety in the authorized stock was designed to meet the desires of the purchasers. The steps of the plan, at least to the point where the shares went out of the ownership of the executors, were so inseparable and interdependent that the acceptance of the1950 U.S. Tax Ct. LEXIS 207">*218 bid and the agreement would have been vacuous had the ownership stopped there. The transfer of the shares by the executors to Stone and his associates was not an independent transaction as to which the executors had any further choice. They were bound by the accepted bid and the agreement and, having received a part of the purchase price, had no alternative but to transfer title to the stock. The question of control, in applying section 112 (b) (5), depends upon the situation existing at the completion of a plan such as this, rather than at some intermediate stage which necessarily must be followed by another. Wilbur F. Burns, 30 B. T. A. 163; affd. sub nom. Bassick v. Commissioner, 85 Fed. (2d) 8; certiorari denied, 299 U.S. 592">299 U.S. 592; West Texas Refining & Development Co. v. Commissioner, 68 Fed. (2d) 77, affirming 25 B. T. A. 1254; Hazeltine Corporation v. Commissioner, 89 Fed. (2d) 513, affirming on this point 32 B. T. A. 4. The petitioner's contention, if otherwise1950 U.S. Tax Ct. LEXIS 207">*219 sound, must, nevertheless, fail because the essential control was lacking. The use of cost in computing the deductions for depreciation has not been proved erroneous.

The remaining issue for decision is whether the petitioner can use the income of Samuel Klein's business during the base period for the purpose of computing its excess profits credit. Here again the petitioner's contention is based upon the application of section 112 (b) (5). It claimed, under the first issue, that it acquired the assets from the Klein estate by a transfer coming within section 112 (b) (5), so that it could use the Klein estate basis, whereas it now claims that it acquired them from Klein in a transaction coming within section 112 (b) (5) so that it can use the base period income of the sole proprietor Klein. It would regard the executors of Samuel Klein as Samuel Klein for present purposes and, thus, it makes exactly the same argument on the question of control on this issue that it made on the first issue. The decision of the Court on that point is that the control necessary to support the petitioner's argument is lacking.

Furthermore, the petitioner's contention fails for another reason which1950 U.S. Tax Ct. LEXIS 207">*220 is in no way precluded from the consideration of the Court. The code allows the base period net income of a "component corporation" 14 T.C. 786">*791 to be used in computing the excess profits credit of an "acquiring corporation." Secs. 741 and 742. The petitioner contends that it was an acquiring corporation and the sole proprietorship business of Samuel Klein was a component corporation. An "acquiring corporation" is defined in section 740 (a) (1) (D) and (h) to include one which has acquired substantially all the properties of a business owned by a sole proprietor in an exchange to which section 112 (b) (5) was applicable. A "component corporation" is defined in section 740 (b) (5) to include the sole proprietor who "transferred the assets." The property referred to is that which a corporation acquired from the sole proprietor in an exchange to which section 112 (b) (5) was applicable. The petitioner, relying upon those provisions, contends that it acquired substantially all the properties of Samuel Klein, a sole proprietor, in an exchange to which section 112 (b) (5) was applicable, and concludes that it can use the base period income of Samuel Klein's business for the purpose of1950 U.S. Tax Ct. LEXIS 207">*221 computing its excess profits credit.

However, the petitioner did not acquire any property from Samuel Klein. Samuel Klein died before the petitioner was formed and without having transferred to the petitioner any of the assets of the business which he conducted as a sole proprietor. He did not transfer those properties to anyone, but when he died his estate acquired them within the meaning of section 113 (a) (5). The estate did not take Klein's basis, but the property in the hands of the estate had a new basis, its fair market value at the date of Klein's death. The estate was, under the provisions of the Internal Revenue Code, a different taxpayer from Klein. Subch. C, Supp. E, I. R. C. The estate, acting through the executors, carried on the business for more than a year and four months and then transferred the properties in question to the petitioner, as the petitioner contended under the first issue. Thus, Samuel Klein, doing business as a sole proprietor, did not transfer property to the petitioner and was not a component corporation within the meaning of the code section cited above. The petitioner would not be entitled to use the base period income of Samuel Klein's1950 U.S. Tax Ct. LEXIS 207">*222 business in computing its excess profits tax credit, even if section 112 (b) (5) did apply to the transfer by the Klein executors. Cf. E. T. Renfro Drug Co., 11 T.C. 994.

The petitioner cites no direct authority for regarding the executors of Samuel Klein as the equivalent of Samuel Klein for present purposes. The detailed and precisely formulated provisions which Congress employed in Subchapter E, Supplement A, precludes the adoption of any such interpretation of its provisions. See, for example, section 740 (g), under which, as the petitioner concedes, Samuel Klein, operating as a sole proprietor, would not qualify as a "component corporation of a component corporation" consisting of his estate. Cf. 14 T.C. 786">*792 E. T. Renfro Drug Co., supra.It was probably not accidental that Congress allowed the use of "component" base period income only where the taxpayer also took the same basis on the transferred property as the "component" had had, adjusted only for any recognized gain or loss in the exchange or exchanges. Congress indicated just how far it would go, and that is not far enough to allow this petitioner to use 1950 U.S. Tax Ct. LEXIS 207">*223 the base period income of Samuel Klein, operating as a sole proprietor. This Court has no authority to extend the law which Congress has enacted, even though it is a relief provision.

Decision will be entered under Rule 50.