Sprouse

Petitioner seeks review of a decision of the Board of Tax Appeals holding that a stock dividend received by him was taxable income.

Sprouse-Reitz Co., Inc., was organized under the laws of Oregon on February 20, 1920. On February 13, 1936, its capital stock, authorized and issued, was as follows :

*975 Its articles of incorporation contained the following provisions:

“The preferred stock shall be entitled to a dividend of 7% annually upon the par value before any dividends are paid on either class of the common stock. The common stock shall be entitled to dividends equally on each class thereof after the dividends on the preferred stock are paid.

“The preferred stock and the non-voting common stock shall have no voting power. The preferred stock shall be made redeemable at any time after three years from the date of its issue, in the discretion of the hoard of directors, but such redemption shall be at par, and after all accrued dividends have been paid. In the event of liquidation or dissolution of the corporation all classes of stock shall share equally in the assets.”

On February 13, 1936, the corporation distributed a 10% stock dividend in nonvoting common stock, divided…