*1044opinion.
Morris:At the hearing petitioner withdrew its claim for special assessment, leaving two questions for our consideration, first, whether, under section 326 of the Revenue Acts of 1918 and 1921, petitioner is entitled to a paid-in surplus on the United States and Canadian patents in computing invested capital, and, if so, the amount thereof; and, second, the value, if any, on March 1, 1913, of those patents for exhaustion purposes. In connection with the first point, the Commissioner raised the question at the hearing whether it was proper for him to have included a paid-in surplus *1045of $1,240, resulting from the turning in of tlie two United States patents to the petitioner at the date of incorporation.
Under section 325 of the Revenue Acts of 1918 and 1921, patents are intangible property. We have previously considered the question whether, under the Revenue Acts of 1917 and 1918, intangibles acquired by way of gift may be included in invested capital as paid-in surplus in the Appeal of Herald-Despatch, Co., 4 B. T. A. 1096. In that case we held:
It seems clear to us, however, that in providing for the inclusion in invested capital of intangibles paid in for stock or shares, subject to very specific and arbitrary limitations, Congress intended to exclude intangibles paid in as a gift. It would be absurd construction indeed which would permit the inclusion in invested capital, under very arbitrary limitations, of intangibles paid in for a consideration, and at the same time,permit the inclusion of intangibles paid in as a gift to the full extent of their actual cash value.
As there is no difference between the Revenue Acts of 1921 and 1918 so far as the question under consideration is concerned, that decision is controlling here. The petitioner may not therefore include in invested capital as a paid-in surplus the value of the patents in question, and the Commissioner was in error in including the amount of $1,240 in invested capital as a paid-in surplus for the United States patents.
The petitioner Iras submitted two methods of computation of the values of the patents at the date turned in and at March 1; 1913, which, being based .on anticipated profits and other assumptions, are of little use. The mere stating of them seems to us to be sufficient to show how inherently fallacious the computations and resulting values are. In the first method, the petitioner took the population' of the • territories sold at the time the patents were paid in and found that it represented .6 of 1 per cent of the total population of continental United States. These territorial rights were sold for $7,500. By multiplying this amount by the petitioner found that the sale of rights in the balance of continental United States would bring $1,250,000, which was reduced by 30 per cent, represent-' ing selling cost and overhead, to $875,000. Discounting the latter amount for the life of the patents by Hoskold’s formula, using 8 and 4 per cent, a net value on April 13, 1911, of $421,225 was arrived at. The March 1, 1913, value was computed by the same method and a net value of $265,734 was reached. The Canadian patents were computed for each of the dates as having a net value of $35,919.
The second method consisted of taking the face brick production in the United States in 1911, assuming that the petitioner would produce one-tenth of the face brick produced therein, and multiplying that one-tenth by $7, the difference between the saving of $10 *1046per thousand in the manufacture of its brick, and $3, which represented selling cost and overhead. Petitioner computed this to be $510,937 and, by using Hoskold’s formula, as above, arrived at a net value on April 13, 1911, of $245,965. A like computation for value on March 1, 1913, of the United States patents gave a total of $279,214. In the computations, population and production estimates were secured from publications of the Census Bureau, United States Department of Commerce.
What we said in Appeal of Gamon Meter Co., 1 B. T. A. 1124, 1131, is particularly applicable:
It appears from the evidence that the valuation * * * for the patents at the time paid in was predicated to a considerable extent upon future hopes and nbt altogether upon what the patents were actually worth in cash at that time. The experience of the men interested in the patents perhaps justified their belief that they would ultimately prove successful and result in large earnings, but the Revenue Act contemplates a cash value at the time the patents are paid in.
If the patents are to be valued as of March 1, 1913, the Revenue Act contemplates a cash, value at that time.
Undoubtedly the patents were valuable. Any higher value, however, than that set forth in our findings of fact would be merely speculative and prospective. We have used the actual sales of territorial rights in arriving at our determination, which seems to us to be the only conclusion warranted by the record. Prior to April 13,1911, the only sales made were the three in 1909, amounting to $7,500, which reduced by 30 per cent, representing selling expenses and overhead, gives an amount of $5,250 which we consider the only evidence of value attributable to the patents as of that date. As there were no sales from 1909 until the latter part of 1913, the value of the patents on April 13, 1911, depreciated to March 1, 1913, is taken as the value on the latter date. The March 1, 1913, value of the Canadian patents, which we find to be $6,105.08, represents the sales of Canadian territory less 30 per cent for selling expenses and overhead. In our opinion, the Canadian sales set forth in the findings of fact are close enough to March 1, 1913, to be indicative of value as of that date. The petitioner is entitled to exhaustion, there-’ fore, for the taxable years in question on the March 1, 1913, value of the patents above set forth. The life of the patents should be computed from the date of the process patents for the reason that, although the machine patents would expire some months prior to the process patents, the machine by itself is of little value without the process.
Judgment will Toe entered on 16 days’ notice, wider Rule 60.