*4203 Petitioner held entitled to computation of its profits taxes under section 328 of the Revenue Act of 1918.
*51 Petitioner seeks the redetermination of a deficiency of $1,053.26, determined by the Commissioner, in income and profits tax for the fiscal year ended May 31, 1919. It alleges that the Commissioner erred by not finding abnormalities in net income and invested capital which would bring the petitioner within section 327 of the Revenue Act of 1918, and in not computing the excess-profits tax in accordance with section 328 of the Revenue Act of 1918. A further error alleged in the petition was waived at the hearing.
FINDINGS OF FACT.
Petitioner is a North Carolina corporation with its principal office at Greenville. It was incorporated in July, 1913. It acquired the assets of a business known as E. B. Ficklen Tobacco Co., paying therefor *52 $14,000. Upon organization 300 shares of its capital stock of the par value of $100 per share were issued as follows:
| E. B. Ficklen | 155 shares |
| L. N. Dibrell | 140 shares |
| A. M. Moseley | 5 shares |
*4204 Prior to the taxable year involved, additional capital stock was sold as follows:
| Suhling & Co | 70 shares |
| J. M. Edmunds & Co | 55 shares |
| E. B. Ferguson | 35 shares |
| Dibrell Brothers Inc | 40 shares |
Petitioner was engaged in buying and selling tobacco on commission, on its own account, and for the joint account of itself and others. Its sales during the fiscal year involved herein amounted to $1,970,999.32. Included in these sales were $1,062.604.83 to Dibrell Brothers and $289,190.68 to J. M. Edmunds Co., both of which organizations were holders of stock in the petitioner corporation.
During the taxable year petitioner loaned $3,000 to New Bern Tobacco Co., which amount was repaid to it in that year. It received $9,700.53, which was one-third of the profits of that company, and such amount was included in computing its income.
Petitioner and Suhling & Co., both being dealers in leaf tobacco, entered into a joint venture to purchase and resell tobacco. For this purpose petitioner issued its notes to the amount of $100,000, which were endorsed by E. B. Ficklen, E. B. Ferguson and Suhling & Co. Such notes were payable in 90 days and on the due dates thereof*4205 like notes for $75,000 were issued. From this venture petitioner realized a profit of $6,183.30 within the taxable year.
The business carried on by petitioner is seasonable in character, the active season being from about the middle of July in one year to the first of March of the next year. Between July 31, 1918, and September 12, 1918, petitioner issued its notes totaling $255,000, all of which were for 90 days. Such amount of $255,000 was the largest amount outstanding at any time during the year. As such notes became due, it issued other notes. The total of the notes so issued for the year was $490,000. All of such notes were endorsed individually by E. B. Ficklen and all bur one thereof were endorsed individually by E. B. Ferguson.
On May 31, 1918, petitioner had cash on hand of $91,319.31, accounts receivable of $23,748.47, and accounts payable of $1,231.32. On May 31, 1919, its inventory of tobacco was $36,457.59.
For the taxable year involved petitioner had a net taxable income of $100,350.54 and its statutory invested capital was $148,514.49. Of this income, $81,878.82 was from commissions earned. The Commissioner *53 computed its excess-profits tax*4206 and war-profits tax as $51,509.32.
E. B. Ficklen was the president of the petitioner and attended to buying, grading, and selling its tobacco. He enjoyed an excellent reputation in the business, gained through 35 years of experience.
OPINION.
PHILLIPS: Petitioner claims that during the taxable year there were abnormalities affecting both its capital and income which bring it within section 327 of the Revenue Act of 1918 and entitled it to a computation of its tax under section 328 of the statute. Several abnormalities are urged. Eighty per cent of the income was from commissions, representing a personal service in which invested capital played only a minor part. The invested capital was only a small part of the total capital used in the business. The money borrowed was secured only after the two officers, and in some cases others, had endorsed the notes individually, thereby risking a further part of their private resources in the business. Substantial profits were derived from joint ventures with others, operated solely on borrowed capital. The petitioner was not in existence in one or more of the prewar years and the profits credits have been computed without the*4207 benefit of the income and invested capital of the prewar years. While no one of these standing alone might be sufficient to constitute an abnormality, we are of the opinion that the combination is such as to overcome any contention that the income was due to a high rate of profit on a normal invested capital and is such as to establish abnormalities affecting the income and capital of the petitioner.
The deficiency will be redetermined underRule 62(c) of the Board and decision entered accordingly.