Lord

In his territorial income tax return for 1930, apppellant, Edmund J. Lord, a resident of the territory of Hawaii, reported as his total income for that year $527,-598.20, against which he claimed deductions and exemptions amounting to $535,-943.78, thus showing no taxable net income, but a deficit of $8,345.58. Among the deductions claimed by appellant was an item of $406,569.98, received by him in 1930 from E. J. Lord, Limited, a Hawaiian corporation, hereinafter called “the corporation.” The territorial tax assessor disallowed this deduction and accordingly found that appellant had in 1930 a taxable net income of $398,224.40, .upon which there was assessed a tax of $18,686.22. The assessment was sustained by the territorial board of equalization and by the territorial Supreme Court ( 32 Hawaii, 896 ), from whose judgment this appeal is prosecuted.

The Supreme Court held that the $406,-569.98 above referred to was a gain or profit received by appellant from a sale by him to the corporation of 600 shares of its capital stock, and that such gain or profit was taxable income under sections 1388, and 1390,, c. 103, Revised Laws of Hawaii 1925. Section 1388 provides: “There shall be…