William O. Douglas

“ This, too, was an insolvency reorganization, though a different procedure was employed to consummate it. The old corporation had outstanding about $300,000 face amount of first mortgage bonds, secured by a lien on its realty. The property, which was an hotel, was leased to an operating company. In 1931, as a result of transactions not relevant here, one Pinney became the sole stockholder of the old corporation and of the operating company. The furniture and fixtures in the hotel were owned by the operating company. ”

“ The legal procedure employed by the creditors is not material. The critical facts are that the old corporation was insolvent and that its creditors took steps to obtain effective command over its property. ”

“ Notes
↑ Sec. 113 (a) (7) of the 1932 Act, 47 Stat. 169, 198, 26 U.S.C.A. Int.Rev.Acts, page 516, provides in part: ' (a) Basis (Unadjusted) of Property.-The basis of property shall be the cost of such property; except that-
' (7) Transfers to corporation where control of property remains in same persons. ”