*214OPINION.
Sternhagen:The question first to be determined is whether the taxpayer was affiliated with the New Haven, that is, whether the New Haven owned directly or controlled through closely affiliated interests substantially all the stock of the taxpayer. It owned directly 58.9 per cent of the shares. It owned 99.9 per cent of the stock of the New England, and hence it can not be doubted that the New England was a closely affiliated interest of the New Haven. Whatever relation existed between the New England and the taxpayer may therefore be properly treated for the purposes of this statute as applying to the New Haven. The question thus becomes one to determine whether the contract of 1890 and the ownership of 17,482 shares, together with the other facts found, bring the two corporations into the statutory affiliation.
The contract is not a mere lease by which a lessor lets its property to a lessee for a rental. It is a virtual relinquishment by the taxpayer to the New Haven of its rights and powers as a subsisting business institution and places the New Haven in control of its destiny. Not only does the New Haven possess and operate the properties, it also may require the taxpayer to acquire more property and to mortgage them as the New Haven directs. All of the taxpayer’s railroad business is out of its hands, including its operating income ; and whatever franchises it acquired have been placed at the New Haven’s disposal. That under these circumstances the New Haven actually controls the business and properties of the taxpayer is plain to be seen.
But it is said that this alone is not enough to bring the statute into operation, because the control of the business and properties is not the control of substantially all the stock. And it is true that in many cases the two are distinct. It does not follow from a lease of the entire properties of a corporation that the lessee can be said to control the stock. Appeal of Old Colony R. R. Co., 1 B. T. A. 1067. There must be substantially more. Certainly there must be a common interest above that of the ordinary lessor in his rent and the preservation of his property. In the present case, however, it is contended that the existence of a substantial minority of outstanding stock should defeat affiliation. It is not shown that by any act such minority has or could frustrate any purpose or plan of the New *215Haven, but, on the contrary, the insignificant number of minority shares which voted at the stockholders’ meetings in 1917 and 1918 indicates an unobstructed control by the New Haven. Whatever the New Haven requested was done. And how could it be otherwise? The New Haven had the property and it also held sufficient votes to overcome any opposition to its management. Although theoretically the lessor had the right to enforce the terms of the lease and demand forfeiture or other remedy in default of any of the covenants, how was this to be accomplished if the New Haven resisted? Its officers controlled the properties and management, both as officers and directors of the taxpayer, and its majority of shares was behind these directors. The sum total of the affairs of the taxpayer was therefore in the hands of the New Haven.
All that the shares of stock represented to the minority holders was the right to receive dividends on their stock. And it may be questioned how that right was to be preserved in the event of financial failure of the New Haven. Even a minority stockholders’ proceeding would hardly be adequate where the effectiveness of the business depends on its relation to the larger transportation system of which it is a part. When one corporation so far controls the property and affairs of the other as to leave in the minority stockholders nothing but a bare interest in a division of the rental, it is quibbling to say that the minority stock is not controlled. We must conclude that the New Haven owned directly or controlled substantially all the stock of the taxpayer, and that they were affiliated within the meaning of the statute.
Both parties refer to the decision of the Board in the Appeal of Old Colony R. R. Co., 1 B. T. A. 1067, but the circumstances there were substantially different. There the lessee owned less than a majority of the lessor’s stock and the other facts were not sufficient to indicate control.
Deciding as we do that the two corporations were affiliated, thus requiring a consolidated return, the second question disappears, for the payment by one of the tax of the other is an intercompany transaction and does not affect income. In view of the stipulation of the parties, the entire deficiency is disallowed.