with John J. Radel Co., 5 B. T. A. 250, and St. Louis Union Trust Co., Executor, 14 B. T. A. 323. They point out that the Revenue Act of 1926, in providing for the basis of property acquired before March 1, 1913, makes no reference to reorganization exchanges. They call attention to the difference in certain provisions of the Revenue Acts of 1918 and 1921 as opposed to corresponding provisions of the Revenue Acts of 1924 and 1926 and argue inferentially that Congress, in the two latter acts, intended to provide for no change of basis in any reorganization exchange, regardless of date They say that if there is any doubt about drawing such an inference, the reports of Congressional Committees must be examined for the Congressional intent and there one will find that Congress was referring to types of exchanges and was not making any division with regard to dates. We find no justification in the acts for the petitioners' view. The provisions of the 1926 Act are clear. The words used therein permit of no doubt as to how the profit in this particular case should be computed. Section 204 (a) (6) was unnecessary and pointless if the property received takes the basis of that given up in all exchanges of this type. The presence of subparagraph (6) in section 204(a), and the absence of any similar provision in section 204 (b), clearly shows that Congress intended different results, depending upon whether the exchange in which the property was acquired took place before March 1, 1913, or after February 28, 1913. If after February 28, 1913, the old basis carried through, but if before March 1, 1913, the property acquired took a new basis different from that of the property exchanged. Here one exchange was after February 28, 1913, and the basis did not change. But another exchange was in 1912 and the basis changed at that time. Cf. Marr v. United States, supra. Section 202 (a) provides that the gain from the disposition of property shall be the excess of the amount realized therefrom over the basis provided in subdivision (a) or (b) of section 204, and the loss shall be the excess of such basis over the amount realized. Section 204(a) has to do with property acquired after February 28, 1913, and provides that the basis for such property shall be cost, except that "if the property was acquired upon an exchange described in subdivision (b), (d), (e) or (f) of section 203, the basis shall be the same as in the case of the property exchanged This latter provision applies to the 34 shares, since they were acquired upon a nontaxable exchange of the kind described in section 203 (b)(2). Thus, the property acquired by the petitioner in the 1925 exchange takes the basis of the property exchanged. The property exchanged was $34,000 par value of first refunding mortgage bonds. So far, the parties may not be in disagreement. But the *行 petitioner apparently contends that, in determining the cost basis for this $34,000 par value of bonds, section 204 (a) (6) again applies as does section 203 (b) (2), so that these bonds acquired in the 1912 exchange take the cost basis of the bonds given in that exchange. Thus, he gets back to the original cost of the bonds. However, the bonds of $34,000 par value which we are now considering were not acquired after February 28, 1913. Consequently, section 204 (a) has no further application. These bonds were property acquired before March 1, 1913, and therefore section 204 (b) applies. Section 204(b) provides that the basis for determining gain or loss on the disposition of property acquired before March 1, 1913, shall be the cost of such property or the fair market value of such property as of March 1, 1913, whichever is greater. The parties agree that cost is greater than March 1, 1913, value. The cost of $175 par value of these bonds is $143.06. The remainder of these bonds, having a par value of $33,825, were acquired in the exchange which took place in March, 1912. Their cost to the petitioner was the fair market value at the date of the exchange of the property given in exchange for them. John J. Radel Co., supra; St. Louis Union Trust Co., Executor, supra; John Glackner Realty Corp., 11 B. T. A. 151; Alden Anderson, 19 B. T. A. 371; Peter Doelger Brewing Co., 22 B. T. A. 1176; Reliance Investment Co., 22 B. T. A. 1287; Rice v. Commissioner, 47 Fed. (2d) 99. The parties have not stipulated the value of this property. They have stipulated, however, that the first refunding mortgage bonds had a fair market value at the date of this exchange of $820 for each $1,000 bond. The Commissioner has used this value as cost, apparently assuming that the property given in exchange had the same value as the property received. The petitioner makes no objection to the use of this value if his own theory is rejected. We find no error in the Commissioner's determination of the profit from this transaction. The parties have stipulated that the petitioner has made a payment of a part of its tax not shown as a credit in the notice of deficiency. Judgment will be entered under Rule 50. AMERICAN EQUITABLE ASSURANCE COMPANY OF NEW YORK, PETITIONER, V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Docket No. 44332. Promulgated December 8, 1932. 1. TRANSFEREE LIABILITY.-Where in 1926 petitioner, a corporation, purchased certain assets from another corporation and as a part of the consideration therefor agreed to pay all taxes, Federal, state, or otherwise, if and when determined, for all years prior to the year 1926, and where respondent has determined a deficiency 2. STATUTE OF LIMITATIONS-TRANSFEREES.-Where the transferor 3. LOSSES OR BAD DEBT DEDUCTIONS.-Where the transferor corporation, an insurance company, keeping its books on an accrual basis, accrued on its books in 1922 items aggregating $74,115.41 as reinsurance claims against three other insurance companies and such companies were adjudged insolvent in 1922 and placed into liquidation during said year, which continued for several years thereafter, and where it is not shown that such claims were worthless in 1922, but that on the contrary they were regarded as having considerable value, the transferor corporation was not entitled to take as a deduction in determining its net income, either as a bad debt ascertained to be worthless and charged off during the taxable year or as a loss incurred in a transaction entered into for profit, such amount of $74,115.41. LeRoy B. Iserman, Esq., and Wendell P. Barker, Esq., for the petitioner. E. A. Tonjes, Esq., for the respondent. A deficiency of $10,413.14, plus interest thereon, was determined against the Norwegian Atlas Insurance Company for the year 1922, and respondent now proposes to assess the same against the petitioner, American Equitable Assurance Company, as transferee, under section 280 of the Revenue Act of 1926. Petitioner resists such claim of the respondent (1) on the ground that it is not a transferee of property within the meaning of section 280 of the Revenue Act of 1926, but on the contrary it was a bona fide purchaser of assets for value, without notice of the tax claim now asserted by the Commissioner, and purchased the assets of the transferor corporation for a full and adequate consideration, free of any claim by the Government; (2) that if wrong in the above contention, nevertheless assessment and collection of the alleged liability were barred by the statute of limitations at the time respondent mailed his deficiency notice to petitioner; (3) that, if it is wrong in either or both of the foregoing contentions, nevertheless most of the deficiency determined by the respondent against the transferor corporation was determined in error, because it was based upon respondent's action in adding back to the transferor's income for 1922 items amounting to $74,115.41 which the taxpayer had claimed as deductions on its income tax return for said year and which it was error on the part of respondent to disallow. FINDINGS OF FACT. The petitioner, American Equitable Assurance Company of New York, is an insurance company organized under the laws of New York, with its principal office in New York City. The Norwegian Atlas Insurance Company is an insurance company organized under the laws of Norway and doing business in the United States through a branch office and a United States manager located in New York City. The two companies will be hereinafter referred to as American Equitable and Norwegian Atlas. Under the laws of New York an insurance company must make certain deposits with the Insurance Department of that State as security against losses, or else deposit it with trustees for that purpose. The Norwegian Atlas complied with that requirement of the law. In 1926 the Norwegian Atlas determined to quit business in this country and desired to take down its deposits with the Insurance Department of New York and with trustees which it had made to secure losses. Under the laws of New York, as administered by its insurance department, it would have been many years before the deposits could have been withdrawn, as they would have been held until all possibility of losses had ceased. In order to obtain the deposited securities, or their value, negotiations were entered into with the petitioner, American Equitable, by which the Norwegian Atlas sold to the petitioner its deposited securities and cash on hand and in bank for the sum of $440,000 cash and the assumption of certain indebtedness by petitioner, more fully described in the clause of the contract relating thereto. The effective date of this contract was May 25, 1926, and, after providing for the payment of $440,000 cash to the Norwegian Atlas, the material parts of said contract are as follows: THIRD: As of such effective date, the American Equitable agrees to assume and pay every obligation, insurance or otherwise, of the Norwegian Atlas now outstanding and known or unknown which has arisen against it in connection with the business transacted by it through its United States Branch, to the same effect as if such business had been transacted and such obligations created by the American Equitable. FOURTH AS of such effective date, the Norwegian Atlas sells, assigns, transfers and sets over unto the American Equitable all its right, title and interest in and to all deposit or trusteed securities now forming part of the assets of such United States Branch, such securities (as well as the cash in banks later referred to) being enumerated in the schedule hereto attached, as well as all cash in banks and other assets, including books of account, now forming a part of the said assets of its United States Branch; excepting. however, its rights to dividends or otherwise on its allowed claims against the Jefferson Insurance Company, the Liberty Marine Insurance Company and the North Atlantic Insurance Company, all in liquidation, which dividends or otherwise are specifically reserved from the effect of this agreement and, if paid by the respective Liquidators to the American Equitable, are to be immediately transmitted to the Norwegian Atlas; and excepting also any rights which may exist in or accrue to the Norwegian Atlas by reason of the claim of its Head Office against the Second Russian Insurance Company some time since assigned to John F. Murphy. EIGHTH The Norwegian Atlas agrees to hold the American Equitable harmless from all unknown claims which may be asserted in connection with the transaction of business through its United States Branch; it being understood that this paragraph of this agreement shall not be effective or create any obligation on the part of the Norwegian Atlas longer than one year from the effective date hereof, and that this paragraph does not in any way affect any unknown losses under policies or any claims for return premiums thereon. TENTH: Nothing herein contained shall be deemed to make the Norwegian Atlas liable to the American Equitable for any unpaid taxes, either federal, state or otherwise, except any taxes accruing against it for the first five months of the year 1926, which last-mentioned taxes-if any-it agrees to pay upon the same being determined; the American Equitable agreeing, as a part hereof, to pay all taxes, federal, state or otherwise, if and when determined, for all years prior to the year 1926 and for the last seven months of such year 1925, as well as after such last mentioned year, including any unpaid part of the federal income tax of the Norwegian Atlas for the taxable year 1925. The contract was approved by the Superintendent of Insurance of New York and was performed by the payment of the agreed consideration and the petitioner thereupon became the owner of and received the securities and cash. The value of the securities and cash transferred to petitioner for $440,000 was approximately $525,000, the difference between the two amounts being considered a reasonable amount to protect petitioner for possible future losses or liabilities of Norwegian Atlas, which petitioner assumed to pay. The determination of the deficieny herein involved was not made until after the transfer and was unknown to the parties at the time of the transaction. In the course of its business, the Norwegian Atlas had reinsured some of its risks with the Jefferson Insurance Company, the Liberty |