Middlesex Ice Co. v. Commissioner

*158OPINION.

Under requirements made by the Treasury Department one of the early steps in ascertaining the consolidated invested capital of a group of affiliated companies is the preparation of a consolidated balance sheet. Each member of the affiliated group enters the consolidation with its invested capital as defined by section 326 of the Revenue Acts of 1918 and 1921. From this preliminary exhibit there is then eliminated such items or amounts as are shown to be duplications either of investment or of earned surplus and undivided profits. The law does not specifically provide for, and we are unable to find, that it in any sense contemplates any reduction or elimination of actual assets not appearing as duplications. In the instant case, it appears that on May 1, 1919, the Cambridge Ice Co.’s surplus was in excess of the amount existing at the date when the holding company acquired the Cambridge Ice Co.’s stock. That surplus, not having been distributed to the stockholders or dissipated in operations, may not be eliminated from the consolidated invested capital by reason of any exchange of stock shares among the owners thereof.

Reviewed by the Board.

The deficiencies may he recomputed in accordance with the foregoi/ng opinion upon 15 days' notice, pursuant to Rule 50, and judgment will he entered accordingly.