*2385 Evidence insufficient to show abnormality of capital or income sufficient to justify special assessment.
*1414 This is a proceeding for the redetermination of a deficiency in income and profits taxes for the year 1921 in the amount of $7,081.33. The only error alleged is that the respondent erred in computing the tax under the special provisions of the Revenue Act of 1921.
FINDINGS OF FACT.
The petitioner is an Illinois corporation incorporated in 1904 with a $5,000 fully paid capital stock. In the year 1921 it was engaged in the business of installing plumbing systems. Its invested capital during the year 1921, as computed by the Commissioner of Internal Revenue, was $8,347.52. Its profits tax computed under the provisions of section 301 of the Revenue Act of 1921, amounted to $9,491.20, but the tax was computed by the respondent under section 302 of that Act. The taxable net income of the petitioner for the year 1921 was $27,395.81 upon the completed long-term-contract basis. During the year 1921 the petitioner's office help consisted*2386 of the two principal owners of the stock of the corporation, Mortimer and Lindstrom, Miss Mason, a bookkeeper, a stenographer and an estimator. The company had no trucks, warehouses or stock of goods. Its other employees, during the year 1921, consisted of plumbers engaged by it to carry out the work of the corporation and numbered from 50 to 75, depending upon the work done during the year.
During the year 1921 the corporation was engaged in a number of large contracts consisting of one with the Western Electric Co., aggregating approximately $112,000, and two other contracts with *1415 the same company calling for contract prices of $42,000 and $150,000. It also had a large contract for installing plumbing in the Illinois Central Hospital of Centralia, Ill., as well as a number of minor contracts. The work on the contract with the Western Electric Co. aggregating $112,000 was begun in the year 1920 and was completed in the year 1921. The other contracts with the Western Electric Co. were completed in 1921. The balance sheet of the petitioner as of December 31, 1920, and December 31, 1921, is as follows:
| DECEMBER 31, 1920 | ||||
| Books | Dr. | Cr. | Amended | |
| ASSETS | ||||
| Cash | $15,598.95 | $15,598.95 | ||
| Accounts receivable | 4,777.94 | 4,777.94 | ||
| Tools | 500.00 | 1 $ 500.00 | 1,000.00 | |
| Furniture and fixtures | 400.14 | 1 93.86 | 494.00 | |
| Deposits on bids | ||||
| Accrual interest | 141.82 | 141.82 | ||
| Corporation bonds | 6,915.42 | 6,915.42 | ||
| Notes receivable - officers | ||||
| Prepaid insurance | ||||
| Prepaid capital stock tax | ||||
| Cost of uncompleted contracts | 222,633.73 | 222,633.73 | ||
| 250,968.00 | 251,561.86 | |||
| LIABILITIES | ||||
| Reserve for depreciation | 1 $10.24 | 604.10 | ||
| Accounts payable | 6,301.75 | 2 593.86 | 6,301.75 | |
| Accrued salaries | 2,525.00 | 2,525.00 | ||
| Accrued liability insurance | 948.59 | 948.59 | ||
| Cash receivable on contracts | 232,606.42 | 232,606.42 | ||
| Reserve for Federal taxes | 11.40 | 11.40 | ||
| Reserve for bad debts | 500.00 | 500.00 | ||
| Capital stock | 5,000.00 | 5,000.00 | ||
| Surplus | 3,074.84 | 2 10.24 | 3,064.60 | |
| 250,968.00 | 251,561.86 | |||
| DECEMBER 31, 1921 | ||||
| ASSETS | ||||
| Cash | $17,217.72 | $17,217.72 | ||
| Accounts receivable | 4,468.66 | 4,468.66 | ||
| Tools | 500.00 | 1 $500.00 | 1,000.00 | |
| Furniture and fixtures | 378.13 | 1 135.87 | 514.00 | |
| Deposits on bids | 125.00 | 125.00 | ||
| Accrual interest | 256.05 | 256.05 | ||
| Corporation bonds | 6,840.42 | 6,840.42 | ||
| Notes receivable - officers | 1,270.00 | 1,270.00 | ||
| Prepaid insurance | 356.17 | 356.17 | ||
| Prepaid capital stock tax | 24.50 | 24.50 | ||
| Cost of uncompleted contracts | 14,948.36 | 3 19,821.75 | 34,770.11 | |
| 46,385.01 | 66,842.63 | |||
| LIABILITIES | ||||
| Reserve for depreciation | 2 $10.24 | 646.11 | ||
| Accounts payable | 2,577.41 | 1 635.87 | 2,577.41 | |
| Accrued salaries | ||||
| Accrued liability insurance | ||||
| Cash receivable on contracts | 36,900.70 | 36,900.70 | ||
| Reserve for Federal taxes | 1,380.74 | 1,380.74 | ||
| Reserve for bad debts | 500.00 | 500.00 | ||
| Capital stock | 5,000.00 | 5,000.00 | ||
| Surplus | 26.16 | 2 10.24 | 3 19,821.75 | 19,837.67 |
| 46,385.01 | 66,842.63 |
Explanation of balance sheet adjustments:
*1416 The petitioner's business association with the Western Electric Co. had been long and favorable and on its contracts with that company in the year 1921 it obtained advances of considerable more than the amounts expended by the petitioner for labor and materials.
OPINION.
SIEFKIN: The petitioner insists that it had an abnormality in capital or income during the year 1921. The only basis for such an assertion rests in the business arrangement which it had with the Western Electric Co. in 1921 by which it obtained advances of sums greater than it was entitled to under the contract, the contract providing for payments up to 85 per cent of the work completed. The relation of these advances to the general financial situation of the petitioner is not shown, and, further, it is not shown that the condition was an abnormal one affecting either the capital or the income of the petitioner during the year*2388 in question. Although the amount of profit earned in the year 1921 greatly exceeds the invested capital of the petitioner in that year, we are without information as to whether or not that was a normal condition in a business such as petitioner's, and is, therefore, covered by the computation of the tax under section 302 rather than by reference to the special assessment provisions.
Judgment will be entered for the respondent.