Before LUMBARD, Chief Judge, and SMITH and MARSHALL, Circuit Judges.
Both the Commissioner and the corporate taxpayer (Nassau) have petitioned for review of a Tax Court decision holding that a deficiency asserted against the corporation was properly determined.*fn1 35 T.C. 268 (1960).
In reaching its determination, the Tax Court made findings of fact. It found that Harry Pildes and his wife, Sarah Pildes, are residents of Brooklyn, New York. For a period of years prior to 1954 Harry Pildes operated two businesses as sole proprietorships: Pildes Company was a retail dispensing optician and Nassau Lens Company was a wholesale dealer in lenses and optical equipment.
On January 3, 1954, Nassau Lens Co., Inc., hereinafter referred to as Nassau, was organized as a New York corporation to take over the business of Nassau Lens Company, and Harry Pildes, as hereinafter described, became the sole stockholder of the corporation. Nassau filed its corporate income tax return for 1954, on an accrual basis, with the district director for the Lower Manhattan District of New York; Harry Pildes and Sarah Pildes filed their joint income tax return for 1954, also on an accrual basis, with the district director in Brooklyn.
On January 6, 1954, Harry Pildes made a formal written offer to Nassau suggesting the transfer of all of the assets of the predecessor proprietorship to Nassau and the acquisition of all of is securities (stock and debenture notes) by Harry Pildes. The offer was promptly accepted by Nassau's board of directors. The transaction was consummated by the actual transfer of the assets to Nassau, which in turn issued its stock and debenture notes to Harry Pildes in accordance with the foregoing offer.
The balance sheet of the predecessor proprietorship as of December 31, 1953, was as follows:
Cash - Marine Midland Bank 18,517.54
Cash - Corn Exchange Bank 3,612.22
Accounts Receivable 40,173.40
Security and Deposits 10.00
Merchandise Inventory - December 31, 1953 160,752.74
Reserve for Deprec. 230.63 2,536.92
Furniture and Fixtures $7,069.38
Reserve for Deprec. 1,943.14 ...