Appeal of Tsivoglou

*744OPINION.

: Under section 202 (b) of the Revenue Act of 1918, when property is exchanged for other property the gain or loss resulting, if any, is to be measured by the difference between the cost of the property transferred and the fair market value of the property received in exchange therefor. This taxpayer exchanged his mercantile inventory and business for stock in a corporation organized by him. . The record is entirely silen t as to. whether the stock so received in exchange had any fair market value, or any value whatever, and, so far as can be inferred from the circumstances of this business and its reorganization, we are satisfied that the stock could not have had any market value.

While the taxpayer’s business, during the years 1918 and 1919, had-produced comparatively large profits, an examination of the state*745ment of resources and liabilities of that business, set forth in the findings of fact, shows that, measured by the excess of liabilities over the true value of assets, it was insolvent on the day the corporation was organized.

In view of the record so made, we are forced to the conclusion that the stock of the corporation received by the taxpayer in exchange for his business had no fair market value, and that no gain can be predicated upon the exchange.