
    Mrs. E. V. Johnston, Deceased, by R. H. Johnston, Heir at Law, Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 14355.
    Promulgated May 28, 1928.
    
      Albert A. Jones, Esq., for the petitioner.
    
      L. C. Mitchell, Esq., for the respondent.
   OPINION.

Smith:

The sole question for determination in this proceeding is the profit, if any, realized by Mrs. E. V. Johnston as a result of exchanging 136½ shares of stock in the Peoples Cleaning & Laundry Co. for a note of $24,331.75 issued by the Southwest Laundries & Cleaning Co. The ability of the Southwest Laundries & Cleaning Co. to pay the note depended upon the success of the company in selling sufficient capital stock at par to meet the notes. It was unable to do so. Mrs. Johnston, together with all the other holders of the notes of the Southwest Laundries & Cleaning Co. received shares of stock of that company in settlement of the note. These shares of stock had a fair market value not in excess of 60 per cent of the par value. The fair market value of the entire number of shares received by Mrs. Johnston was $14,599.05. The profit realized by her from the transaction was $949.05.

Judgment will be entered under Rule 50.  