H. B. Smith Mach. Co. v. Commissioner

*528OPINION.

We stated in the Appeal of Hagerstown Shoe & Legging Co., 1 B. T. A. 666, “these problems [affiliation] are not flat mathematical or legalistic puzzles.” Nor should we look to a tabulated statement of the percentages of stock ownership and if there appears a slight divergency in stock ownership or perchance some small minority interest that owns stock in one corporation and not in another, stop in our consideration of the problem and say such facts control our decision. All the facts must be taken into account. We find in this case that Elton A. Smith was the dominating force and owned and controlled substantially all of the stock of petitioner during his lifetime. He conducted the business practically as a sole proprietorship. He supplied the funds without which it could not have continued in business. It is true that he had from time to time permitted certain of his trustworthy employees to subscribe for small blocks of stock. They represented no virile minority; they were entirely quiescent. They were more interested in the employment which petitioner afforded to them than in a voice or control in its management. Upon the death of Elton A. Smith, petitioner, being without his financial assistance, was in a precarious condi*529tion. The Smith Estate Corporation was a child of necessity; it was to and did fill the place theretofore occupied by Elton A. Smith. The two corporations were an economic unit. One used the facilities of the other — money was advanced by one to the other without interest charges. The employees of one were freely used by the other without reimbursement. We are of the opinion that the small minority stockholdings should be disregarded in this case and that petitioner and the Smith Estate Corporation were affiliated corporations within the purview of section 240 of the Revenue Act of 1918.

The decision reached relative to the first issue renders unnecessary a discussion or decision concerning the second issue.

Judgment will be entered on 15 days' notice, wider Rule 50.