*2561 The evidence fails to establish that petitioner is entitled to classification as a personal service corporation.
*584 This proceeding is for the redetermination of a deficiency in income and profits tax for the calendar year 1919 in the amount of $3,207.89. It is alleged that the Commissioner erred in denying the petitioner classification as a personal service corporation under section 200 of the Revenue Act of 1918.
FINDINGS OF FACT.
The petitioner is and was during the year 1919 a Pennsylvania corporation, with its principal office and place of business at 307 Fourth Avenue, Pittsburgh, Pa. It was incorporated in August, 1914, with an authorized capital stock of $25,000, for the purpose of taking over the then existing business of C. M. Logue & Bro., a partnership, to which partnership business it did shortly thereafter succeed.
During the year 1919, petitioner conducted a general insurance agency and insurance brokerage business, selling almost every kind of insurance except life insurance. It also acted as state agent for several insurance*2562 companies and as such agent appointed field agents for those companies, and during the year 1919 there were in different parts of Pennsylvania 175 subagents whom the petitioner had appointed to represent the companies for which it was state agent. The field agents solicited business, wrote policies of insurance and sent to petitioner duplicates of the policies written. The petitioner received part of the premiums for the policies written by the subagents. During the year 1919, approximately 30 per cent of petitioner's income was derived from the activities of the 175 subagents.
The authorized capital stock was divided into 500 shares of the par value of $50 each, and during 1919 its outstanding stock was held by and in the amounts as follows:
| Stockholder | Shares | Per cent |
| H. A. Logue | 352 | 73.95 |
| J. E. Stone | 33 | 6.93 |
| J. A. Hetrich | 33 | 6.93 |
| H. C. Fry, Jr | 33 | 6.93 |
| E. E. Leyda | 8 | 1.68 |
| C. M. Lowry | 6 | 1.26 |
| W. H. Kensinger | 6 | 1.26 |
| H. L. Logue | 3 | .63 |
| Jos. Wingerson | 2 | .43 |
| 476 | 100.00 |
*585 All of the stockholders above listed, except H. L. Logue, were regularly and actively engaged in the conduct of petitioner's business.
The petitioner*2563 had in its office employees who were engaged in the performance of clerical duties. However, if at any time any of the employees procured a client to whom insurance was sold, the employee procuring the business would receive a commission. The amount, if any, of business procured in the taxable year in this manner is not disclosed.
During 1919, petitioner had a surplus, and in years prior thereto investments had been made where attractive propositions were offered. The amount of such investments, or the income therefrom in 1919, if any, or in prior years, is not shown.
The Commissioner, upon audit of the return for 1919, denied the petitioner classification as a personal service corporation.
OPINION.
LOVE: Section 200 of the Revenue Act of 1918 provides in part:
The term "personal service corporation" means a corporation whose income is to be ascribed primarily to the activities of the principal owners or stockholders who are themselves regularly engaged in the active conduct of the affairs of the corporation and in which capital (whether invested or borrowed) is not a material income-producing factor * * *.
The petitioner contends that it comes within this provision*2564 of the statute and that it is entitled to classification as a personal service corporation.
The petitioner alleges that capital, either invested or borrowed, was not a material income-producing factor for the year in question. This allegation was specifically denied by the respondent, the burden, therefore, was on the petitioner in respect of this issue.
The record discloses that the petitioner had an authorized capital stock of $25,000, divided into 500 shares, and that during 1919, 476 shares of stock were outstanding. We are not informed for what the stock was issued. It is further shown that prior to 1919, petitioner *586 had invested part of its surplus and we are not informed as to the amount of such investment, or the amount of income, if any, received in 1919 from such investments. Neither are we informed as to whether the petitioner borrowed money for use in conducting its business during the year in question. Thirty per cent of petitioner's income came from activities of subagents. See .
We are of the opinion, therefore, that the petitioner has failed to prove that it meets the requirements*2565 of the statute and, consequently, we approve the respondent's determination in regard thereto.
Judgment will be entered for the respondent.
Considered by TRUSSELL, SMITH, and LITTLETON.