63 T.C. 316">*316 OPINION

Respondent determined deficiencies in the petitioners' Federal income taxes for the year 1969, as follows:

The only issue for decision is whether petitioners are qualified electing shareholders entitled to the benefits of section 333² with respect to the gain realized on the liquidation of their controlled corporation. These cases were submitted on a meager but fully stipulated set of facts. The stipulation of facts and attached exhibits are incorporated herein by this reference.

1974 U.S. Tax Ct. LEXIS 10">*12 Petitioners are all individuals who resided in the State of Washington at the time the petitions were filed. Their 1969 Federal income tax returns were filed with the Western Service Center, Ogden, Utah.

During 1969 Lee R. Dunavant, Herman H. Gorlick, and Morris Gorelick were the sole officers, directors, and shareholders of D & 63 T.C. 316">*317 G, Inc., a Washington corporation incorporated on May 24, 1956. On November 28, 1969, a meeting of the board of directors was held, the minutes of which read as follows:

A special meeting of the Board of Directors was called to order by the President for the specific purpose of discussing whether or not said corporation should be dissolved and liquidated within 30 days pursuant to the Internal Revenue Code, Section 333.

It was moved, seconded and carried that the Board of Directors recommend to the Stockholders of the corporation that said corporation be dissolved, and it was further resolved that said question of dissolution be voted upon at a meeting of the Shareholders which meeting is to be called immediately.

There being no further business, the meeting adjourned.

(S) H. H. Gorlick

H. H. Gorlick, Secretary

ATTEST:

(S) Lee R. Dunavant

Lee1974 U.S. Tax Ct. LEXIS 10">*13 R. Dunavant, President

DATED: November 28, 1969.

A special meeting of the stockholders of D & G, Inc., was held on the same date, at which the following action was recorded:

A special meeting of the Stockholders of D & G., INC. was called to order by the President. All Stockholders were present and waived notice of the meeting, and further certified that they had notice of said meeting being called for the specific purpose of discussing the resolution of the Directors to dissolve said corporation.

It was moved, seconded and carried, that the corporation be dissolved and liquidated within one (1) calendar month, and that the officers be authorized to execute the necessary Statement of Intent to Dissolve and the necessary Treasury Department and/or Internal Revenue Service forms.

There being no further business, the meeting was adjourned.

(S) H. H. Gorlick

Secretary

ATTEST:

(S) Lee R. Dunavant

President

DATED: 11/28/69

APPROVED:

(S) Lee R. Dunavant

(S) H. H. Gorlick

(S) Morris Gorelick

STOCKHOLDERS

63 T.C. 316">*318 On December 4, 1969, D & G filed its Statement of Intent to Dissolve with the Washington secretary of state. This statement listed the present corporate officers, directors, 1974 U.S. Tax Ct. LEXIS 10">*14 and shareholders, as well as the number of shares held by each from the inception of the corporation. On December 8 the corporation mailed Internal Revenue Form 966 to report the corporate liquidation with copies of the minutes of the stockholders meeting and the Statement of Intent to Dissolve attached, to the office of the Commissioner of Internal Revenue in Tacoma, Wash. Petitioners have never filed Form 964, Election of Shareholder under Section 333 Liquidation. On December 21, 1969, the corporation completely liquidated, transferring assets with a value of $ 650,000 in exchange for all of its outstanding stock.

Pertinent provisions of the statute and regulations are set out in the margin. ³ It is stipulated that petitioners did not file Form 63 T.C. 316">*319 964, and hence that they failed to comply with the letter of the regulations. They argue, however, that because the Form 966 with attachments provided respondent with the same information required by Form 964, they are in substantial compliance with the statute and therefore entitled to its benefits. Respondent, on the other hand, insists that strict adherence to the regulations is required. On the facts of this case, we1974 U.S. Tax Ct. LEXIS 10">*15 agree with respondent.

1974 U.S. Tax Ct. LEXIS 10">*16 Petitioners are confronted with a singular obstacle in that this Court, while on occasion requiring relaxation of strict procedural requirements with regard to taxpayer elections permitted by the Code, ⁴ has never applied section 333 or its predecessor ⁵ in the absence of a timely Form 964 filing. Virginia E. Ragen, 33 T.C. 706">33 T.C. 706 (1960). ⁶ This seeming divergence is not due to inconsistency or a shift in emphasis on our part, but rather to the specific requirements of section 333.

1974 U.S. Tax Ct. LEXIS 10">*17 The test for determining whether the substantial compliance doctrine may be used in connection with a particular regulation has been variously expressed. For present purposes it suffices to say that requirements must be rigidly observed when they relate "to the substance or essence of the statute," Fred J. Sperapani, 42 T.C. 308">42 T.C. 308, 42 T.C. 308">33163 T.C. 316">*320 (1964), ⁷ while nonadherence to those which are "procedural and therefore directory" may sometimes be excused. The section 333 election which petitioners omitted to file is a requirement of the former sort.

Petitioners assert that all of the information contained in Form 964 was available to respondent from the Form 966 filed by the corporation and from other sources. Information, however, is not the principal feature of the required filing. Cf. Columbia Iron & Metal Co., 61 T.C. 5">61 T.C. 5 (1973). Filing of a written election under1974 U.S. Tax Ct. LEXIS 10">*18 section 333(c) has a substantive effect not only on the classification of the particular individual shareholder as a "qualified electing shareholder" but also on the status of every other electing individual because of the 80-percent rule of section 333(c)(1). Filing an actual election within 30 days is an express statutory prerequisite which the regulatory mandate of section 333(d) only serves to implement. Clearly the "essence" of the statute is to demand specific, contemporaneous, and incontrovertible evidence of a binding election to accept the tax consequences imposed by the section. We are not at liberty to infer that an election existed when the unequivocal proof required by Congress does not exist.

No written election by the shareholders which might substitute for Form 964 appears on the record. Filing Form 966 is a corporate function and is independent of the shareholders' choice of action. Of the papers that accompanied Form 966, the directors' resolution refers to section 333, but the stockholders' minutes do not. We cannot hold the absence of any written expression of petitioners' intentions qua stockholders to be without significance. ⁸ Petitioners' argument fails1974 U.S. Tax Ct. LEXIS 10">*19 because they have not filed the written election required by the statute.

To reflect the concessions of the parties on another issue,

Decisions will be entered under Rule 155.