New Jersey Machinery Exchange v. Commissioner

*628 Before LITTLETON, SMITH, and TRUSSELL.

On June 3, 1925, the Commissioner determined a deficiency of $1,671.78 for the calendar year 1919. He held that petitioner and A. W. Faber, Inc., were affiliated and should have filed a consolidated return. Petitioner claims that the two corporations were not affiliated within the meaning of the statute.

FINDINGS OF FACT.

Petitioner corporation, organized on December 16, 1913, is engaged in the sale of new and used machinery, with principal office at Newark, N.J. A.W. Faber, Inc., is also a New Jersey corporation, organized February 27, 1919, and is engaged in the manufacture and sale of rubber bands. The outstanding capital stock of the petitioner during 1919 consisted of 82 shares and was owned as follows:

The outstanding capital stock of A. W. Faber, Inc., during 1919 consisted of 1,500 shares and was owned as follows:

*2234 The Commissioner, upon the evidence before him, held that the New Jersey Machinery Exchange and A. W. Faber, Inc., were affiliated during 1919, and computed the net income and invested capital upon the basis of a consolidated return.

OPINION.

LITTLETON: This proceeding was called in due course on February 15, 1926, on the day calendar for hearing upon the merits, after due *629 notice to counsel for both parties on September 14, 1925. When the proceeding was called for trial no one appeared on behalf of the petitioner and the proceeding was taken under submission upon such of the allegations of the petitions as had been admitted in the answer.

Section 240 of the Revenue Act of 1918 provides that two or more domestic corporations shall be deemed affiliated if one corporation owns directly or controls through closely affiliated interests or by a nominee or nominees substantially all of the stock of the other or others, or if substantially all of the stock of two or more corporations is owned or controlled by the same interests. The question whether one corporations owns directly or controls through closely affiliated interests or by nominees substantially all of the*2235 stock of the other, or whether the stock of two corporations is owned or controlled by the same interests is a question of fact which must be established by competent evidence. The Commissioner held that the petitioner and A. W. Faber, Inc., were affiliated within the meaning of the statute and the evidence before us consisting of certain allegations in the petition admitted by the Commissioner in his answer does not establish that the Commissioner's determination was erroneous. The allegations in the petition which are denied by the Commissioner and unsupported by proper proof can not be accepted by the Board for the purpose of deciding whether the deficiency should be modified.

Judgment for the Commissioner.