Huyler's v. Commissioner

*29OPINION.

We are called upon to determine whether the proven .facts are such that a logical reasoning must lead to the conclusion that “substantially all the stock” of the two Gramercy companies and of Huyler’s was, during the calendar year 1918 and the nine-month period January 1, 1919, to September 30, 1919, “owned or controlled by the same interests,” so as to make the determination of their tax liability a single, rather than a multiple, problem. No question arises here as to the affiliation of the Gramercy Investing Co. of New York, and the Gramercy Investing Co. of Pennsylvania; their affiliation with Huyler’s is the issue which the parties are contesting.

We have already pointed out the definite test laid down by section 240 of the Revenue Act in determining whether or not two or more corporations are affiliated and that it is only by taking into consideration all of the facts and circumstances that a proper conclusion can be reached. In Appeal of Rishell Phonograph Co., 2 B. T. A. 229, we said:

The statute contains three elements which are not free from doubt. It is impossible to define exactly what is meant by controls; no general rule can be made that will fix the percentage necessary to constitute substantially all the stock of a corporation; and the word interests is a term susceptible of several interpretations.

It would be dangerous to attempt to make a strict definition of any one of these doubtful terms to be applied in every case, for the same, reasons that have caused the courts to avoid attempting to define due process of law. If *30a strict and generally applicable definition were practicable, it probably would have been furnished by Congress. The very use of elastic terms indicates an intent to have them construed flexibly in the light of the peculiar circumstances of each particular case.

* * * Circumstances which might indicate control in one case would not necessarily constitute it in another where other circumstances, involving other elements, were at variance.

* * * The extent of the stock necessary to constitute substantially all may well vary according to the degree of control exercised.

Our problem then is to weigh all the evidence and come to a conclusion whether, in all the circumstances, the Gramercy Investing Co. of New York, was affiliated with Huyler’s; since it must follow that whatever our determination may be in this respect it must be the same in the case of the Gramercy Investing Co. of Pennsylvania, whose entire authorized and outstanding capital stock was owned and controlled by the New York company.

All of the capital stock of the Gramercy Investing Co. of New York was owned outright by the three brothers, Frank DeK., David, and Coulter D. Huyler. These same individuals owned directly 11 shares each, a total of 33 shares, or 22 per cent of the stock of Huyler’s, and they held, as trustees under the will of John S. Huyler, an additional 96 shares, or 64 per cent of Huyler’s stock, making in all 86 per cent of the stock of Huyler’s. Under the will of John S. Huyler, the trustees holding this stock of Huyler’s in trust were absolved from every restriction whatsoever with reference to its control, save alone that of dissipating the proceeds from its sale. They were empowered to sell and transfer, in their discretion, all or any part of the securities forming a part of any of the trusts created under the will; to invest and reinvest the proceeds from the sale of such securities; to continue any investment made during the life of the testator; to consent to the increase of the capital stock of any corporation in whose stock the trust funds may be invested; to subscribe for, take, and pay for any portion of the bonds of such corporation ; to consent to the merger or consolidation of such corporation with any other corporation, or to the sale of any part of the property of such corporation. These provisions of the will were made to expressly include the trusteed stock of Huyler’s. The control of the trustees over this stock was absolute. They could exercise every power vested in direct ownership.

Contention is made by the respondent that the three Huyler brothers, in their individual capacities and in their capacity as trustees, were not the “ same interests ” within the purview of the statute. This contention is based upon the respondent’s assumption that David Huyler and his two brothers were at odds over the business policies and management of Huyler’s, as evidenced by David Huyler’s *31failure of reelection to the directorate of Huyler’s, in 1916 or 1917, and the litigation which he instituted against his brothers involving a question as to the interpretation of the will with respect to the voting of the trusteed stock of Huyler’s by the three brothers as trustees. But this is not borne out by the facts. The uncontroverted evidence is that David Huyler was not reelected to the directorate of Huyler’s because of a physical breakdown which incapacitated him to perform the duties of a director or of an officer of the corporation; and that he, believing that under the provisions of the will the trusteed stock of Huyler’s could only be voted by unanimous agreement of the trustees while his two brothers contended that the stock could be voted by a majority of the trustees, instituted litigation for the purpose of securing an interpretation of the provisions of the will relating to the voting of the trusteed stock. The litigation was amicably settled in chambers late in 1918, and an agreement was reached at the same time to restore David Huyler as a director and officer of Huyler’s. If there was any connection between David Huyler’s failure of reelection as a director of Huyler’s and the litigation which he instituted to secure an interpretation of the will, it has not been shown by evidence.

Furthermore, the provisions of the will relating to the voting of shares of stock of any corporation held by the trustees at any time are clear and explicit in providing that such stock “ shall always be voted by them or by their proxies at all corporate meetings as a unit and in case of any differences of opinion among my Executors and Trustees as to the manner in which said stock shall be voted * * * I direct that the decision of a majority of my Executors and Trustees then acting shall be conclusive and shall control * * All cir cumstances considered, we must conclude that 86 per cent of the stock of Huyler’s was owner or controlled by the same interests who owned and controlled all of the authorized and outstanding stock of the Gramercy Investing Co. of New York.

It appears clear that in Huyler’s and the Gramercy Investing Co. of New York, there is a commercial and economic unity. The Gramercy Company was organized by the three Huyler brothers in 1910, and in 1913 they turned over to that company, without any consideration therefor, all of the real properties which had come into their possession through inheritance from their father. At the time these properties Avere turned over to the Gramercy Company, most of them were occupied, and had been so occupied for several years, by Huyler’s. During the years and periods under consideration, three of the properties, 458 Fulton Street, Brooklyn, 1320 Chestnut Street, Philadelphia, and 1117 F Street, NorthAvest, Washington, D. C., in each of which the Gramercy Company owned a one-third interest, *32were occupied by Huyler’s under renewal leases dated June 1, 1917. The rentals reserved under these renewal leases were in the same amounts as the rentals reserved under the original leases which had been executed in 1907, and were considerably less than the fair rental value of the properties. Four hundred and fifty-eight Fulton Street, Brooklyn, was leased at an annual rental of $7,500, whereas the fair rental value of that property, at June 1, 1917, was not less than $14,000 per annum; 1320 Chestnut Street, Philadelphia, was leased at an annual rental of $9,000, though the fair rental value of that property, at June 1, 1917, was not less than $12,000 per annum; and 1117 F Street, Northwest, Washington, D. C., was leased at an annual rental of $6,000, while the fair rental value of the property, at June 1, 1917, was not less than $10,000 per annum.

The Gramercy Investing Co. of New York, owned the entire fee in the premises known as East 18th Street and Irving Place, New York City. The land had been acquired by John S. Huyler, the founder of Huyler’s, and he had erected thereon a group of six buildings adaptable to the manufacturing needs of Huyler’s. From the time of the completion of the buildings in 1907, to and including the year 1919, Huyler’s occupied this property, as a year to year tenant, under an oral agreement, at an annual rental of $94,000, although during the years 1918 and 1919 the fair rental value of this property was a considerably higher figure.

It seems clear that in Huyler’s and the Gramercy Investing Co. of New York, there is a commercial and economic unity. The Gramercy Company might well be termed the realty-holding company for Huyler’s. Save for certain residential properties which it owned, and which constituted but a small portion of the whole, its properties were occupied by Huyler’s for less than a fair compensation. It was organized, owned, financed and controlled by the three Huyler brothers, who owned or controlled 86 per cent of the stock of Huyler’s. Its corporate duties might have been as well carried on and discharged by Huyler’s. Why it was organized as a separate company does not appear, and the reason for it is immaterial here. The officers and directors were the same in both companies. The Gramercy Company maintained its office at Huyler’s main factory, East 18th Street and Irving Place, New York City, and paid no rent for the space occupied.

In the ownership by Mrs. Martha A. Gaines of 14 per cent of the stock of Huyler’s, the respondent comprehends an active adverse minority sufficient to defeat the claim for affiliation. The litigation instituted in 1917 by Mrs. Gaines against the three Huyler brothers, the resignation of her son from the directorate of Huyler’s immediately following the commencement of the litigation, the voting of *33Mrs. Gaines’ stock, in the stockholder’s meeting of July, 1918, for a group of persons who had not been duly nominated as candidates for directors and who were not acceptable to the Huyler brothers, and the presence of Mrs. Gaines’ son and attorney during the entire negotiations which led to the sale of her stock to her nephew, Coulter D. Huyler, in 1919, are facts which the respondent links together in a chain of circumstances indicating, he contends, that Mrs. Gaines was an active adverse interest. But the evidence is conclusive that the action which Mrs. Gaines brought in 1917 was against the three Huyler brothers in their capacity as executors of their father’s estate on a purely collateral matter in no way connected with any act of the defendants in their management of Huyler’s. The resignation of her son from the directorate of Huyler’s was his own voluntary act, the reasons for which do not appear. The presence of the son and attorney of Mrs. Gaines, during the negotiations which led to the sale of her stock of Huyler’s to her nephew, can hardly be accepted as indicating anything more than a natural desire on the part of Mrs. Gaines and her son to safeguard their own interests. Mrs. Gaines was 65 years of age at the time of the transaction, and the amount involved was in excess of a half million dollars.

It is true that in the election of directors at the stockholders’ meeting in July, 1918, Mrs. Gaines’ stock was voted for a group of persons who had not been duly nominated for the office of director of Huyler’s and who were not acceptable to the three Huyler brothers, and this may indicate that Mrs. Gaines was not in complete harmony with the policies of the Huyler brothers as directors of Huyler’s. Perhaps hers was an active adverse interest. But when we examine the problem in its three dimensions, and consider all the facts, we can not help but conclude that Huyler’s and the Gramercy Investing Co. of New York, are, in reality, a single commercial and economic unit; that substantially all of the stock of both corporations is owned or controlled by the same interests; and that the situation presented by the relationship of these two companies is precisely that which Congress sought to reach by the provisions of section 240 of the Revenue Act of 1918. Accordingly, we hold that Huyler’s, the Gramercy Investing Co. of New York, and the Gramercy Investing Co. of Pennsylvania were affiliated corporations during the year 1918 and the nine-month period January 1 to September 30, 1919, and as such are entitled to have their tax liability, for the year and period stated, determined upon the basis of a consolidated return of net income and invested capital. Since we have decided that the three companies are affiliated corporations, we do not need to pass upon petitioners’ contention that Commissioner Blair was without legal authority to overrule the holding of Commissioner Roper that the three companies were affiliated corporations.

*34The next issue confronting us is respondent’s action in reducing the invested capital of Huyler’s, for the fiscal year ended May 31, 1917, the seven-month period June 1 to December 31, 1918, and the calendar year 1919, by the amounts of $468,038.69, $427,871.66 and $384,007.05, respectively. The reductions of invested capital alleged to have been made by the respondent are not specifically shown in the deficiency letters, and our examination of the entire record fails to disclose the source or derivation of these figures, or the basis of respondent’s alleged action. The facts set forth in the petition upon which the allegation of error is based are, that the petitioner used, as a basis for the computation of invested capital for the years and periods in controversy, the book value of its assets as at the beginning of each year and period, and that the Commissioner reduced the value of said assets by the amounts already stated. It may be that had the petitioner submitted proof of these alleged facts, we would be in a position to extend to it all or a part of the relief for which it prays. But none of these facts were proved. If the respondent has reduced the invested capital for the years and periods in question as alleged, the record does not show it. Nor does it appear that the invested capital allowed by the respondent is less than that shown by the books of account.

The only evidence in the record which appears to have any bearing whatever upon this issue is that relating to the conservative accounting practice of Huyler’s prior to 1912, during which period expenditures of a capital nature involving considerable amounts were charged to expense; that equipment, fixtures, furniture and machinery were consistently carried on the books at a value of only 25 per cent of cost; that the cost of remodeling and improvements to leased premises was consistently charged to expense of the year in which made and never capitalized; that at May 31, 1912, the book value of equipment, fixtures, furniture, and machinery was at least $704,185.80 less than actual cost, a situation which had been brought about through arbitrarily writing down the accounts in which such items were carried, at the close of each year, to 25 per cent of cost; and that in May, 1913, said sum of $704,185.80 was restored to asset accounts and to surplus, as of May 31, 1912, in accordance with instructions of the board of directors. Is it the restoration of this amount to the asset accounts and to surplus as of May 31,1912, which the respondent has questioned, and has only partially permitted for invested capital purposes ? The record does not show, and we can not draw inferences.

On the other hand, respondent has placed in the record evidence that in the computation of Huyler’s invested capital, for the years and periods in controversy, he has taken into account and permitted *35to be restored to asset accounts and to surplus, all capital expenditures which have been identified by the petitioner as having been previously charged to expense less accrued depreciation in amounts computed and determined upon by the petitioner itself. In other words, any adjustment of invested capital which the respondent has made, on account of capital expenditures erroneously charged to expense in prior years, has been made upon the basis of, and in accordance with, facts and figures furnished to him by the petitioner. Not a shred of evidence was submitted to show that the data which the petitioner furnished to respondent and upon which respondent acted in good faith, was not substantially in accord with the actual facts, nor that it showed a situation materially different than that reflected by the books of account. Such being the case we can not disturb the respondent’s action complained of in this issue.

The next issue is the action of respondent in disallowing depreciation deductions, for the fiscal year ended May 31, 1917, the seven-month period ended December 31, 1918, and the calendar year 1919 in the amounts of $7,654.13, $5,950.86, and $13,875.64, respectively. The depreciation deductions which respondent has allowed for the years and period in question are less than the deductions claimed by the petitioner in its returns by the amounts above stated. But here again respondent has acted upon the facts and figures submitted to him by the petitioner; and the deductions which he has allowed, except for a difference of $277.13 for the seven-month period ended December 31, 1918, are those which the petitioner itself certified to him in affidavit form as reasonable in amount. If the deductions which respondent has allowed are inadequate to take care of the depreciation actually sustained, it is because petitioner certified to him, in the first instance, amounts inadequate for that purpose. No evidence was submitted by petitioner which might be said to have even a remote bearing upon this issue. The allegation of error stands wholly unproved. We may not, under the circumstances, disturb respondent’s action.

The next issue is the March 1, 1913, value of a lease owned by Huyler’s on that date covering the premises known as 508 Fifth Avenue, located between 42nd and 43rd Streets, New York City, and the deduction to which petitioner is entitled for each of the years and periods under consideration, on account of the exhaustion of that value. Much expert testimony was introduced, including testimony concerning other rentals in the same neighborhood. The witnesses who gave this testimony were particularly well qualified, through years of experience in dealing in and appraising property in the vicinity of the property concerned, to give opinion evidence *36as to real property values. They were in a very favorable position to appraise the value of the property concerned because they had an intimate knowledge of it and its surrounding properties at March 1, 1913. At least two of the witnesses have qualified before other jurisdictions to give opinion evidence as to real property values; one witness having testified as a real property expert in over 400 cases.

The witness, Bobert Huntley, has been engaged as a real estate appraiser for the past 26 years, during the last 25 of which he has had charge of the appraisal work of the firm of Joseph P. Day of New York City. Among the important appraisals made by him were the properties of the New York, New Haven & Plartford Eail-road Co. in the Boroughs of Manhattan and the Bronx, including the Grand Central Station, which valuation was made for rate-making purposes. He also appraised all of the property on both sides of 42nd Street between Park Avenue and Third Avenue; the properties of the Consolidated Gas Co., the New York Edison Co., the Equitable Building, the New York Stock Exchange Building, a large number of properties in the immediate vicinity of 508 Fifth Avenue, including the properties just across the street, and numerous other properties, some oí which were valued for local taxation purposes and others for rate making purposes.

The witness, Watson P. Anderson, has been engaged for the past five years as an appraiser of real estate with an appraisal company. Prior to that time he was a real estate editor of the Eecord and Guide, a leading real estate publication in New York City, and before entering on his editorial duties had been engaged as an expert appraiser of real estate. He has valued a large number of properties in the immediate vicinity of 508 Fifth Avenue, including all of the property in the block on which this building was located. He has also had wide experience in valuing leaseholds.

The qualifications of these witnesses are such that Ave are disposed to attach great weight to their testimony. Both witnesses testified that the value of the land at 508 Fifth Avenue at March 1, 1913, was $500,000. Huntley testified that the value of the building at the same date was $20,000, while Ajnderson placed a Avalué thereon of $26,000. Both testified that a fair rental value for the property at March 1, 1913, and June 1, 1917, was an amount equivalent to 5 per cent of the value of the land, plus 7 per cent of the value of .the building. Huntley computed the fair rental of the property at March 1, 1913, to have been $26,400, and at May 1, 1923, $26,120 per annum. At March 1, 1913, the lease had a remaining life, including the renewal period, of 31 years, 2 months. Based upon these factors, the witness Huntley fixed the value of the lease at March 1, 1913, at *37$185,237.06, and Anderson placed a value thereon at the same date of $156,969.

We conclude, upon a careful consideration of all of the evidence before us, that the March 1, 1913, value of the lease owned by Huyler’s covering the premises known as 508 Fifth Avenue, New York City, was $160,000, and that petitioner is entitled to an annual deduction for exhaustion of the value of the lease of $5,079.37. For the fiscal year ended May 31, 1917, and the calendar year 1919 the petitioner is entitled to deductions for exhaustion in the amount of $5,079.37 each. For the seven-month period ended December 31, 1918, it is entitled to a deduction of seven-twelfths of $5,079.37, or $2,962.96.

In the appeals of the Gramercy Investing Co. of New York, Docket Nos. 1356 and 2374, respondent’s action in refusing to accept the book values of certain real properties for invested capital purposes, for the years 1918 and 1919 has been assigned as error. The properties involved are: The premises occupied by Huyler’s as a main factory at East 18th Street and Irving Place (58-64 Irving Place and 128-136 East 18th Street and 127 East 17th Street), New York City; a one-third interest in 458 Fulton Street, Brooklyn, New York; a one-third interest in 1320 Chestnut Street, Philadelphia, Pa.; a cne-third interest in 1117 F Street, Northwest, Washington, D. C.; and the residential apartment properties at 72nd Street and West End Avenue (301 West 72nd Street and 263 and 265 West End Avenue), New York City; all of which were paid in to the Gramercy Investing Co. of New York in February and April, 1913, by its stockholders without any consideration therefor except that the company assumed whatever mortgages there may have been on the properties at the time.

The above properties were first recorded upon the books of the Gramercy Company at the values fixed and determined upon for the purposes of the surrogate’s appraisal in the settlement of the estate of John S. Huyler, which values were subsequently increased in the aggregate amount of $368,015.68 as more particularly appears in the findings of fact.

After carefully considering all of the evidence bearing upon the values of these properties, we have found that in each instance the actual cash value at the date paid in to the Gramercy Investing Co. was greater than the value at which the properties were first recorded upon the company’s books, though, in the case of East 18th Street and Irving Place, New York City, 458 Fulton Street, Brooklyn, and 1320 Chestnut Street, Philadelphia, less than, and in the case of 72-nd Street and West End Avenue, New York City and 1117 F Street, Northwest, Washington, equal to, the adjusted book *38values and the values claimed by the petitioner for invested capital purposes. We have fixed the actual cash value of these properties, at the date paid in to the Gramercy Company, as follows: East 18th Street and Irving Place, New York City, $867,000 for the land and $398,000 for the building, a total of $765,000; one-third interest in 458 Fulton Street, Brooklyn, $75,000 for the land and $4,000 for the building, a total of $79,000; one-third interest in 1320 Chestnut Street, Philadelphia, $96,666.67; one-third interest in 1117 F Street, Northwest, Washington, $50,000; and 72nd Street and West End Avenue, New York City, $305,278.80. In the case of the Philadelphia and Washington properties, we have been unable to determine the value of the land and buildings separately for lack of evidence upon which to base a segregation of those values.

In fixing the values of the above described properties, at the date paid in to the Gramercy Company, except in the case of 1320 Chestnut Street, Philadelphia, we have given great weight to the expert opinion evidence of Huntley and Anderson, whose experience and qualifications we have related in some detail. In giving testimony as to the value of these properties they supported their opinions by evidence of sales of other properties, when it was practicable to do so; and where this was not possible, they explained in detail the manner in which they arrived at their opinions.

The only evidence as to the value of 1320 Chestnut Street, Philadelphia, is the testimony of the witness Lardner Howell, who for the past 11 years has been the real estate officer of the Girard Trust Co., Philadelphia, in which capacity he has had direct charge of all real property of the trust estates agency accounts and of all mortgage loans. Pie testified that he was familiar with the property in question in 1913, and that, in his opinion, the actual cash value thereof, at the date it was paid in to the Gramercy Company, was $400,000.

1320 Chestnut Street, Philadelphia, is located directly opposite the main entrance to Wanamaker’s department store, and close to the intersection of Broad and Chestnut Streets, in the heart of the Philadelphia shopping district. The property was improved by a building, modern in the character of its construction and its conveniences. Some time in 1913 the property at 1312 Chestnut Street, 80 feet distant from 1320 Chestnut Street, was sold for the sum of $290,000. The improvements on 1312 Chestnut Street at the time of the sale consisted of a building not nearly as good or as modern as the one standing at 1320 Chestnut Street.

In arriving at an opinion as to the value of the latter the witness Howell testified that he took into consideration the facts that “ Huyler’s was well advertised; anybody could find it”; and that the property would have sold for more than 1312 Chestnut Street, “because of the name that was attached to it.” To what extent the *39witness was influenced by these facts does not appear, but it does appear that the value which he has assigned to the property is somewhat greater than that which would have been the case if the name of another less successful in business than Huyler’s had been attached to it. The previous connection of the name of an outstanding successful business enterprise with certain real property appears to us to be an element of doubtful value in the determination of the actual cash value of the property, especially in a case where the purchaser or prospective purchaser would have no right to the use of the name in the conduct of a business carried on in the premises, save, perhaps, merely for the purpose of a more particular identification of the location of his business. We are satisfied from the evidence that the value of 1320 Chestnut Street was at least equal to the value of 1312 Chestnut Street, which was sold for $290,000 in the same year as the first mentioned property was paid in to the Gramercy Investing Co.; but any sum which we might fix in excess of $290,000 would necessarily be a matter of pure guesswork unsupported by any findings of fact. As only the value of a one-third interest in 1320 Chestnut Street, Philadelphia, is at issue here we fix the value thereof at the date paid in to the Gramercy Investing Co. of New York at $96,666.67.

As to the value of 1117 F Street, Northwest, Washington, at the date paid in to the Gramercy Investing Co. of New York, we have the opinion evidence of the witnesses William L. Beale and H. Clifford Bangs. For the past seven years the witness Beale has been real estate officer of the American Security & Trust Co., Washington, and for nearly seven years previous to entering into his present occupation, he was assistant assessor of real property for the District of Columbia. At the present time the witness Beale is also Chairman of the Appraisal Committee of the Washington Beal Estate Board. The witness Bangs has been engaged in the real estate business in and around the vicinity of Washington for the past 30 years, during which time he has made and negotiated numerous sales of properties in the down-town business section of Washington. He is at present a member of the Appraisal Committee of the Washington Beal Estate Board.

Both of the witnesses, Beale and Bangs, testified that they were familiar with the property at 1117 F Street, Northwest, Washington, in 1913, and both expressed an opinion that its value was $150,000. Late in 1913 or early in 1914, as the result of charges made by an investigating committee that business properties in Washington were underassessed in comparison with the poorer classes of dwellings, for the purposes of local taxation, the Board of Assessors of the District of Columbia undertook a revaluation of the business properties lying between 7th and 15th Streets and Pennsylvania *40Avenue and I Street, Northwest. Sales made in 1914 showed that the valuations of the Board of Assessors were within 5 per cent of actual market values. As assistant assessor, the witness Beale was engaged in this work of revaluation. His opinion as to the value of the property under consideration is based upon the knowledge of values which he gained during the investigation and revaluation of business properties by the Board of Assessors, and the sales of other comparable business properties made in and about the year 1913. The witness Bangs, in addition to his knowledge of values of business properties, gained through over 30 years of experience in dealing in real property in and around the vicinity of Washington, 16 years of which were prior to the year 1913, was particularly qualified to pass upon the value of the particular property under consideration because he had negotiated three sales of the property and had twice leased it. The testimony of these two witnesses stands wholly uncontroverted; and in view of all of the foregoing circumstances, we can not help but feel that the value which they have placed upon this property as of 1913 represents the actual cash value thereof at the date paid in to the Gramercy Investing Co. of New 'York. As only the value of a one-third interest in 1117 F Street, Northwest, Washington, is at issue here, we fix the value thereof at the date paid in to the Gramercy Co. at $50,000.

The next issue is that raised in the appeal of the Gramercy Invest ing Co. of New York, Docket No. 1356, and involves the determination of the March 1, 1913, value of the property at West 72nd Street and West End Avenue (301 West 72nd Street, 263, 265, and 267 West End Avenue), New York City, for the purpose of computing the gain from the sale thereof in 1919. The selling price of the property is not in disp'ute. We have already found that the value of 301 West 72nd Street, 263 and 265 West End Avenue, at the date paid in to the Gramercy Company, February, 1913, was $305,278.80, and our reasons therefor have already been stated in this opinion. The property at 267 West End Avenue was purchased in December, 1912, by the Gramercy Investing Co. at a cost of $60,000. We conclude that the March 1, 1913, value of these properties was $365,-278.80 and the gain derived from the sale thereof should be computed upon the basis of such value.

The last issue to be considered is that raised in the appeal of the Gramercy Investing Co. of Pennsylvania, relating to respondent’s action in refusing to accept the book value of the property located at 1320 Chestnut Street, Philadelphia, Pa., for invested capital purposes for the year 1918. It will be recalled that the Gramercy Investing Co. of Pennsylvania was organized in 1913 for the purpose of taking over this property from the Gramercy Investing Co. of New York, *41and that it paid to the latter in exchange for said property its entire authorized capital stock of $80,000 par value. We have found the value of the property at the date it was paid in to the Gramercy Investing Co. of New York to be $96,666.67. As this transaction occurred a short time before and during the same year we are of the opinion that the property should be included in the invested capital of the Gramercy Investing Co. of Pennsylvania at the same figure.

Judgment will be entered on 15 days* notice, m accordance with Rule 50.