FRANK, Circuit Judge.
1. Up to the time in 1936 when the shares were delivered to the employees, the taxpayer retained such control of the shares that title had not passed to the employees.
2. We turn to the question whether the transaction resulted in taxable gain to taxpayer. We think that the Tax Court correctly held that it did. The delivery of those shares was not a gift, else (1) it would have been wrongful as against taxpayer's stockholders, (2) the value of the shares could not have been deducted as an expense under § 23(a), and (3) the employees as donees would not be obliged to pay, as they must,
But, as the delivery of the shares here constituted a disposition for a valid consideration, it resulted in a closed transaction with a consequent realized gain. It is of no relevance that here the taxpayer had not been legally obligated to award any shares or pay any additional compensation to the employees; bonus payments by corporations are recognized as proper even if there was no previous obligation to make them; although then not obligatory, they are regarded as made for a sufficient consideration.
For § 111(a) of the Revenue Act of 1936, 26 U.S.C.A. Int.Rev.Code § 111(a) provides that the gain from "the sale or other disposition of property" shall be the excess of "the amount realized therefrom" over "the adjusted basis" provided in § 113(b), and § 113(b) — in the light of § 113(a), 26 U.S. C.A.Int.Rev.Code § 113(a) — makes the "basis" the cost of such property. True, § 111(b) provides that "the amount realized" is the sum of "any money received plus the fair market value of the property (other than money) received." Literally, where there is a disposition of stock for services, no "property" or "money" is received by the person who thus disposes of the stock. But, in similar circumstances, it has been held that "money's worth" is received and that such a receipt comes within § 111(b). See Commissioner v. Mesta, 3 Cir., 123 F.2d 986, 988; cf. Commissioner v. Halliwell, 2
The taxpayer properly asks us to treat this case "as if there had been no formal bonus plan" and as if taxpayer "had simply paid outright 150 shares of duPont stock to selected employees as additional compensation." On that basis, surely there was a taxable gain. For to shift the equation once more, the case supposed is the equivalent of one in which the taxpayer in the year 1936, without entering into a previous contract fixing the amount of compensation, had employed a transposition expert for one day and, when he completed his work, had paid him 5 shares of duPont stock having market value at that time of $500 but which it had bought in a previous year for $100. There can be no doubt that, from such a transaction, taxpayer would have a taxable gain. And so here.
The order of the Tax Court is affirmed.
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