*144OPINION.
Trammell:The principal issue presented by this appeal is whether the taxpayer is entitled to include in its invested capital for the year 1918 any amount on account of good will, if any, acquired by it from the partnership D. N. & E. Walter & Co. in exchange for shares of its capital stock. The taxpayer contends that good will was so acquired; that it had an actual cash value of $268,777.00, and that it should be included in invested capital subject to the limitations on intangibles.
The evidence establishes that in the year 1896 the taxpayer, in exchange for 648 shares of its capital stock of the total par value of $648,000, acquired all of the assets of the partnership mentioned, including its good will. No good will was set up on the books of the taxpayer, but witnesses for the taxpayer testified that this was because of the fact that it is a “ family corporation,” and that the assets were transferred just as they stood on the books of the partnership. The fact that good will was not set up on the books of the taxpayer is onty an evidentiary fact to be considered in connection with all other facts, but is not controlling. Since the value of the tangible assets acquired by the taxpayer from the predecessor partnership equaled the par value of the stock issued for all the assets, the question arises as to whether good will was specifically acquired for stock. We are convinced from the evidence that such good will as the predecessor partnership had was included among the assets transferred to the taxpayer. It is clear also that stock of the taxpayer corporation was the sole consideration for all assets which it received.
It then becomes necessary to determine the value of the good will acquired from the predecessor partnership. The partnership had been engaged in business since 1858 and had become firmly established as a successful enterprise so that its business extended through several States. The books of the partnership have been lost or destroyed and the net profits and the amount of the tangible assets *145for the years prior to 1896 are not now shown. The sales of the partnership for the years 1892 to 1896, inclusive, were as large as they were after the corporation took over the business.
These facts lead us to the conclusion that the corporation acquired good will for stock, but are not sufficient to enable us to determine the value thereof. Pertinent facts relating to the business and assets of the partnership are lacking. It does not necessarily follow that the partnership had good will of the same value as the good will which the successor corporation is shown, by the capitalization of its earnings, to have had, and we have no other evidence upon which to determine the value thereof. The net earnings and assets of the partnership might have been greater or less than the net earnings and assets of the corporation, and the conditions under which it carried on business might have been entirely different. While the gross sales of the partnership were as large as the gross sales of the corporation, we have no evidence as to what its profits were. It might have been that the business methods of the corporation were so superior to those of the partnership as to enable it to realize profits while the partnership’s business had no net profits above a fair return on tangible assets. At any rate, the profits realized by the corporation, in the absence of other evidence, are not sufficient evidence to establish the actual value of good will of the partnership.
We are convinced, however, that the taxpayer acquired a mixtqre of tangible and intangible assets for stock the pro rata values of which can not be segregated.
The taxpayer, therefore, comes within the scope of section 327 and it is entitled to have its profits tax determined under the provisions of section 328, if it would receive relief thereby. The determination of the tax under that section, if the Commissioner finds that the application of comparatives will give any relief, shall be final.
With reference to the amount of $10,000 paid by the taxpayer to McCann, we are not satisfied that it was paid for the good will of the McCann Allen Co. While the witnesses in the case testified that the payment to McCann was for the good will of the business in which he was then engaged, they also testified that it was paid with the object of securing McCann’s services for the taxpayer. It may be pointed out that the payment is not claimed or shown to have been made to the firm of McCann and Allen whose good will the taxpayer claims to have purchased, but was made to McCann as an individual. The transaction savors more of a payment in the nature of a bonus to McCann for entering into the taxpayer’s employ than of a purchase of the good will of the McCann Allen Co. In our opinion, the evidence does not establish that the expenditure in question was of a capital nature and the taxpayer’s claim for the inclusion of the amount thereof in its invested capital should be denied.
*146The evidence relative to the payment of $5,000 to Baldwin and Howell in the year 1909 satisfies us that it was for services rendered by them in procuring a lease of certain real estate for the taxpayer. The payment was, therefore, a capital expenditure and represented a part of the cost to the taxpayer of the lease acquired. It follows that the taxpayer is entitled to deduct from gross income, during each year of the life of the lease, an aliquot part of the cost thereof, and to include in invested capital for the year 1918,. as a part of its earned surplus, the depreciated cost of the lease as of January 1, 1918.
Order of redetermination will be entered on 10 days' notice, under Rude 50.