Superior Service Asso. v. Commissioner

*1156OPINION.

Graupner:

The taxpayer has advanced the contention that it is entitled to classification as a personal-service corporation despite the fact that it has a large invested capital. It asserts that section 200 of the Revenue Act of 1918 contemplates the exclusion of a corporation from personal-service classification only when capital is a material income-producing factor and produces profits as a result of trading as a principal. It further contends that, because its income is derived from' charging customers for a service rendered in place of selling a commodity, and because all the members of the trust, who under the law would correspond to the principal stockholders of a corporation, were devoting their entire time and attention to the business of the taxpayer and were regularly engaged in the active conduct of the affairs of the taxpayer, it is entitled to the classification claimed despite the showing of a large amount of invested capital in the schedules shown in paragraph 5 of the findings of fact. With these contentions we can not agree. The mere fact that the taxpayer’s capital is to a large degree invested in plant and equipment which is utilized for the laundering of soiled clothing or the cleaning of clothes does not in any way detract from the fact that such investment of capital is a material income-producing factor. A careful reading of section 200 makes it very apparent that the exclusion contained in the last half of the section is not to be so read as to vest a corporation using a large amount of capital for the purpose of conducting its business with a classification which would give it benefits over another corporation with an equal amount of invested capital but engaged in trading in some commodity.