The opinion of the court was delivered by: LORD
This is a tax refund suit arising under the Internal Revenue Laws of the United States, brought by the plaintiff (hereinafter referred to as 'taxpayer') against the defendant (hereinafter referred to as 'Commissioner'). At the trial, the parties stipulated the facts to be as follows:
The taxpayer timely filed her income tax return for 1945 and paid the tax shown to be due thereunder. Thereafter, the Commissioner made a deficiency assessment against the taxpayer in the sum of $ 2,872.93, which, together with interest, aggregated a total of $ 3,258.60, which was duly paid to the Commissioner. The taxpayer filed a claim for refund of the tax and interest paid representing such deficiency, which claim was disallowed by the Commissioner.
Prior to 1941 the taxpayer purchased a one-half undivided interest in 125 shares of stock of Book No. 1794, Series 89 of the Lawndale Building and Loan Association (hereinafter referred to as 'Association'). These shares had a redemption value in 1945 of $ 25,000. Payments for these shares were to be made in monthly installments of $ 1.00 per single share. The Association was incorporated under the laws of Pennsylvania. The Association's by-laws provide in part as follows:
'Section 1. Shares of the association * * * may be issued either serially or non-serially and may be either installment shares, full-paid shares, prepaid shares, * * * or any other kind of shares which are now or may be hereafter authorized by law.
'Section 2. Each owner of installment shares shall pay as dues at or before each monthly meeting of the board of directors $ 1.00 per single share and $ 2.00 per double share.
'Section 7. * * * upon withdrawal after one year and within two years from the date of issuance, the holder shall be entitled to twenty-five per centum of the earnings apportioned or credited thereon; * * * and after six years and prior to maturity, fifty per centum of such earnings.'
'Section 2. Dividends on installment and prepaid shares shall be declared by the board of directors out of the undivided profits of the association. The basis for such dividends shall be the average amount, including dues and previously credited dividends, standing to the credit of each shareholder ...