*2709 On the evidence, held, that the trade or business operated by the taxpayer was one which had no invested capital, or not more than a nominal capital, under the provisions of section 209 of the Revenue Act of 1917.
*1022 Before JAMES, STERNHAGEN, TRAMMELL, and TRUSSELL.
This appeal involves a deficiency in profits taxes of $2,706.27 for the year 1917, and is based upon the refusal by the Commissioner to assess the taxes under section 209 of the Revenue Act of 1917.
FINDINGS OF FACT.
The taxpayer is a partnership, organized in September, 1916, and doing business in Pittsburgh, Pa. Approximately $100 was paid in on the organization of the partnership. This was for paying office rent. The business was that of brokers and dealers in tin plate and metals.
The balance sheet on December 31, 1916, was as follows:
| Assets: | |
| Cash | $846.67 |
| Petty cash | 12.25 |
| Accounts receivable | 1,208.40 |
| Total | 2,067.32 |
| Liabilities: | |
| Accounts payable | 450.00 |
| C. H. Brushaber | 96.48 |
| James L. Perkins | 36.70 |
| Surplus | 1,484.14 |
| Total | 2,067.32 |
The balance sheet on*2710 December 31, 1917, was as follows:
| Assets: | |
| Cash | $10,716.22 |
| Petty cash | 87.50 |
| C. H. Brushaber & Co., Inc | 1.692.35 |
| Pittsburgh Metals Co | 1,372.03 |
| Accounts receivable | 1,987.46 |
| Total | 15,855.56 |
| Liabilities: | |
| Accounts payable | 1,692.14 |
| Jas. L. Perkins | 9.57 |
| Surplus | 14,153.85 |
| Total | 15,855.56 |
The only persons who were engaged in the business were the two partners and one employee who was bookkeeper and stenographer. No capital was put into the business by the partners during 1917, nor was any money borrowed. The December 31, 1917, surplus represented undistributed earnings of that year, except in so far as the December 31, 1916, surplus was carried over. It was not employed in the business. The taxpayer had no storage facilities and carried no stock. It owned no property and there were no bad debts. All business was solicited by the two partners. The method was to make inquiries from prospective buyers as to their demands, obtain quotations from sellers, which were referred to the buyers, and, if satisfactory, orders were placed with the sellers.
*1023 The gross business handled by the taxpayer in 1917 was $2,466,747.83. This was divided*2711 into three classes, as follows:
| Class A | $2,055,990.00 |
| Class B | 218,529.21 |
| Class C | 192,228.62 |
| 2,466,747,83 |
Class A consisted of sales where shipments were made direct from the seller to the buyer, who transmitted payment therefor direct to the seller. On this class the taxpayer received commissions from the seller in the amount of $14,949.60.
Class B consisted of sales where shipments were made on bills of lading to the order of the consignor-seller, notify the customer, sent with sight draft, to which bill of lading was attached. The taxpayer released the goods by payment of the draft with funds secured from the purchaser for the purpose and sent bill of lading to customer. Those accounts were all in the Pittsburgh district and the method was adopted as a convenience for the buyer and seller. The taxpayer merely collected the bill, forwarding to the seller the invoice price less its commission. The taxpayer neither borrowed money nor used its own funds for the purpose.
Class C consisted of goods purchased by the taxpayer on orders previously received from buyers and resold, a profit being realized on the sale as distinguished from commission. In*2712 no instance were any funds of the taxpayer required in these transactions. In no case was the taxpayer's profit affected by changes in market conditions after a sale had been arranged and prior to payment for the goods, because goods were never ordered except where a sale had been previously arranged.
In its profits-tax return for 1917, the taxpayer reported an inventory at the end of the year in the amount of $2,277.45. This represented a shipment of metal from sellers to buyers which the taxpayer held pending adjustment of certain differences. They were not goods purchased by the taxpayer and it did not, in fact, have the possession of or title to these goods.
DECISION.
The deficiency determined by the Commissioner is disallowed.