*44 Before STERNHAGEN, LITTLETON, MARQUETTE, and TRAMMELL.
This appeal is from deficiencies in income and profits taxes for the calendar years 1918 and 1919 in the amounts of $57,143.78 and $42,548.77, respectively, aggregating $99,692.55. The deficiencies arose from the action of the Commissioner in adding to the taxpayer's income for those years the two per cent portion of the income tax borne by the Director General of Railroads when the taxpayer's property was under Federal control. The facts alleged in the petition are undisputed. The appeal was submitted with the .
FINDINGS OF FACT.
1. The taxpayer is a corporation organized under the laws of New Jersey and was at all times herein mentioned a common carrier subject to the Interstate Commerce Act.
2. The Director General of Railroads took possession of and operated the taxpayer's*2572 railroad from December 28, 1917, to March 1, 1920. Pursuant to the Federal Control Act and the proclamation of the President, the Director General entered into an agreement by the terms of which the annual guaranteed compensation of the taxpayer was fixed at $4,145,102.30, which was the amount certified by the Interstate Commerce Commission to the President as the average annual railway operating income of the taxpayer computed in accordance with the provisions of the Federal Control Act.
3. The Director General of Railroads bore the Federal income tax for the years 1918 and 1919 in the amounts of $73,839.42 and $83,100.90, respectively. The Commissioner in auditing the income-tax return of the taxpayer added to its taxable income for the years 1918 and 1919 the above amounts and asserted additional tax liability, as follows: For the year 1918, $57,143.78, and for the year 1919, $42,548.77. The Commissioner also made changes in invested capital, as to which no question is raised by this appeal.
4. The taxpayer concedes that if the 2 per cent tax paid by the Director General is excluded from the taxpayer's taxable income, the additional tax for the year 1918 would be $28,789.45, *2573 and the additional tax for the year 1919 would be $19,107.97.
*45 DECISION.
The deficiency determined by the Commissioner is disallowed in part and approved in part. The amounts of $73,839.42 for 1918 and $83,100.90 for 1919, being the 2 per cent borne by the Director General, are not income of the taxpayer. The taxpayer's liability should be recomputed in accordance with this decision and the following opinion, and final order will be made on consent or on 15 days' notice, under Rule 50.
OPINION.
STERNHAGEN: The sole issue is similar to that presented in the , decided May 21, 1925, and the opinion is in all respects applicable here.