The opinion
Lummus, J.
The taxpayer was a member of the firm of Hornblower and Weeks, and had guaranteed the firm against loss on the margin account of one Guiney with that firm. Guiney owed that firm $225,869.80, which was greatly in excess of the value of his collateral security. On February 29, 1932, the taxpayer paid Guiney’s debt to the firm, and took over the collateral, which included one hundred Shares of stock of New River Company. In 1938 the taxpayer sold that stock. In computing his taxable gains, by taking the cost of all the collateral taken over as $225,869.80, the taxpayer found that taking all the collateral at its market value the pro rata cost of the New River Company stock was $220.36 a share. The respondent in assessing the tax took as the *756 cost the market value on February 29, 1932, which was $35 a share. The taxpayer paid the tax as assessed by the respondent, and applied for an abatement. The Appellate Tax Board denied an abatement, and the taxpayer appealed to this court. The only question relates to the “cost” of the New River Company stock. G. L. (Ter. Ed.) c. 62, § 5 (c), as appearing in St. 1935, c. 481; § 7. The burden of establishing error in the assessment is on the taxpayer. G. L. (Ter. Ed.) c. 62, § 45. Staples v. Commissioner of Corporations & Taxation, 305 Mass. 20, 26 . Commissioner of Corporations & Taxation v. Filoon, 310 Mass. 374, 376 .
Of course a taxpayer who in good faith pays for property more than it is worth may nevertheless be entitled to have his gains, if any, computed according to the actual cost. Van Sciver v. Rothensies, 122 Fed. (2d) 697. But here there was not merely a purchase of the stock. The taxpayer was bound to pay the whole debt as a guarantor, and took the collateral by way of subrogation. Fitcher v. Griffiths, 216 Mass. 174, 176 . Sheldon, Subrogation (2d ed.) §§ 86, 87. He paid for two things, the collateral, and freedom from liability on his guaranty. Madden v. Commissioner of Corporations & Taxation, 280 Mass. 321, 324, 325 . No division of the price was made between them. Pennsylvania Indemnity Co. v. Commissioner of Internal Revenue, 30 B. T. A. 413. Raymond v. Commissioner of Internal Revenue, 40 B. T. A. 244. Majestic Securities Corp. v. Commissioner of Internal Revenue, 42 B. T. A. 698. Under these circumstances the cost of the stock was rightly fixed at its market value on the day it was obtained by the taxpayer. Helvering v. Taylor, 293 U. S. 507 .
Petition for abatement dismissed.