FORMAN, District Judge.
The estate of C. V. Hill and its executors, J. Stuart Hill and C. V. Hill, Jr., claim refunds of federal income tax paid by the late C. V. Hill during his lifetime for the calendar years 1935 and 1936, in two separate actions brought against the Collector of Internal Revenue. Both actions were tried together before this Court and have the same bases in fact. The amounts involved differ because one action represents a claim of refund for the year 1935 and the other for the year 1936.
C. V. Hill, a resident of Trenton, New Jersey, now deceased, was born on October 10, 1863. During his lifetime he regularly reported his income for federal income tax purposes on a cash basis. He paid such tax in the amount of $9,513.04 for the year 1935 and in the amount of $10,487.43 for the year 1936. Plaintiffs received a notice of a deficiency of income tax for these years under date of May 29, 1939, in the amounts of $384.14 and $2,014.47, respectively. These deficiencies were paid by plaintiffs. Claims for refund of tax for 1935 and 1936 were disallowed by the Commissioner of Internal Revenue on September 12, 1939, and November 19, 1940, respectively.
On August 31, 1935, C. V. Hill agreed with a syndicate composed of five individuals to sell 900 shares of the common stock of C.V. Hill & Co., Inc., upon condition that the determination of the fair sale value of the stock be submitted to a neutral and independent appraiser agreeable to both parties. Upon a written submission of such value by the appraiser, the syndicate was to have the option of purchasing the entire amount of stock for cash upon the basis of the value determined by the appraiser within thirty days thereafter. The syndicate consisted of J. Stuart Hill and C. V. Hill, Jr., sons of C. V. Hill, and three others, all five of whom were employees of the company.
On December 9, 1935, the syndicate was formally organized by virtue of an agreement entered into by these five persons, whereby the sons of C. V. Hill were designated the syndicate managers. It was proposed therein that 450 shares of stock should be purchased, allocable to the syndicate members as follows:
J. Stuart Hill 175 shares
C. V. Hill, Jr. 175 shares
J. Tinley Knotts 45 shares
Earl J. Kressler 40 shares
Frank D. MacMaster 15 shares
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