Appeal of Karr

*636OPINION.

The Commissioner alleges that the taxpayer was in constructive receipt of income on account of salaries credited t(f him *637but not drawn. In this connection we have repeatedly held the contrary view. Appeals of H. C. Couch, 1 B. T. A. 103; A. Bluthenthal, 1 B. T. A. 173; A. L. Englander, 1 B. T. A. 760; J. M. Edmunds, 1 B. T. A. 998; Nicholas J. Maisel, Jr., 2 B. T. A. 66; Thomas Bemis, Sr., 2 B. T. A. 255.

It is also clear from the foregoing findings of fact that, notwithstanding the decision of the Commissioner in respect of the corporation, Karr, Ellis & Co., Inc., holding that that corporation was a personal service corporation, that corporation was not a personal service corporation in that it lacked two of the essential elements of such a corporation, viz, (1) that its principal stockholders should be actively engaged in the conduct of its affairs, and (2) that capital should not be a material income-producing factor. It appears here that the only stockholders investing any money in the corporation were not actively engaged in the conduct of its affairs, and from the method of doing business it is very clear that capital was a material income-producing factor in the business. In view of the foregoing the deficiency determined by the Commissioner must be disallowed.