3 B.T.A. 1080">*1080 Before LITTLETON, SMITH, and TRUSSELL.
This is an appeal from the determination of a deficiency in income and profits tax for the calendar year 1917 in the amount of $1,685.86, arising from the refusal of the Commissioner to classify the corporation 3 B.T.A. 1080">*1081 as one having no invested capital, or not more than a nominal capital, under section 209 of the Revenue Act of 1917.
FINDINGS OF FACT.
The taxpayer is a Massachusetts corporation engaged in business as foreign freight contractors, forwarding agents, and custom-house brokers, with principal office at Boston. It was organized in February, 1917, with a capital stock of $5,050, all of which was paid in in cash by two stockholders, each of whom devoted his entire time to the business and received an annual salary of $5,200.
During the taxable year the entire income was derived from commissions received from steamship companies and charges made to shippers for services as a broker. The gross income and deductions were as follows:
| Brokerage and service on shipments | $26,633.58 |
| Profit and commission on trucking | 1,125.00 |
| Profit and commission on warehousing | 368.00 |
| Services on customs entries | 2,650.00 |
| 33,773.58 |
| Deductions: | |
| Labor and wages | 3,356.00 |
| New furniture and fixtures | 860.00 |
| Donations, gratuities, etc | 1,000.00 |
| Rent | 900.00 |
| Telephone | 1,260.00 |
| Printing | 1,585.00 |
| Postage | 2,650.00 |
| Traveling | 2,409.17 |
| 13,120.17 |
The balance sheets at the beginning and end of 1917 were as follows:
| Beginning of taxable year 1917. | Close of taxable year 1917. | |
| ASSETS. | ||
| Office fixtures | $50.00 | $300.00 |
| Cash and accounts receivable, etc | 5,500.00 | 13,403.83 |
| 5,550.00 | 13,403.83 | |
| LIABILITIES. | ||
| Capital stock | 5,050.00 | 5,050.00 |
| Accounts payable | 500.00 | 2,500.00 |
| 5,550.00 | ||
| Profit and loss | 5,853.83 | |
| 13,403.83 |
3 B.T.A. 1080">*1082 The item of cash and accounts receivable represents outstanding charges against shippers for brokerage and advances made for freight, insurance, etc.
The item of accounts payable represents obligations to steamship, insurance, and cartage companies for amounts advanced on shipments for account of clients; also, amounts due for office expenses. The taxpayer used its capital in the payment of general expenses. Occasionally, it made small advances on freight charges to steamship and railway companies for the account of its clients, 1926 BTA LEXIS 2477">*2479 to avoid delay and as a part of its service. These advances were promptly remitted by the shipper upon receipt of statement of the amount thereof. In all cases where advances were not made by the taxpayer amounts sufficient to care for such charges were obtained in advance from shippers.
During the year 1917 the taxpayer's capital was nominal.
Order of redetermination will be entered on 15 days' notice, under Rule 50.