*2913 The value of good will acquired for stock being established, it may, subject to the statutory limitations, be included in invested capital.
*150 The respondent determined deficiencies in income and profits taxes for the years 1917, 1918, and 1919, in the respective amounts of $4,129.52, $57,521.43, and $26,419.97. Petitioner alleges that respondent erred in excluding from invested capital good will acquired for stock and in including in income for 1919 dividends from domestic corporations, and further alleges that the statute of limitations has run against the deficiencies for all three years.
FINDINGS OF FACT.
Petitioner is a corporation, organized in July, 1890, under the laws of the State of California, with its principal place of business at San Francisco. In September, 1890, it purchased for all of its capital stock, of the par value of $1,000,000, all of the assets, including stock in trade, good will, and all the personal and real property of a partnership known as H. Liebes & Co., which had been organized in 1863.
The business of*2914 the partnership, which was continued by the corporation, was that of buying, preparing, and selling furs of all kinds. The business of the partnership was the largest of that kind on the west coast. In purchased and sold furs throughout the continental United States, Alaska, and some foreign countries. Its reputation for fair dealing and quality of merchandise was the very best. With but few exceptions, all of the fur dealers in San Francisco acquired their training and experience while in the employ of either the petitioner corporation or its predecessor partnership. The partnership conducted a successful and expanding business and when taken over by the corporation, arrangements were being made to move into new and larger quarters. The contemplated move was made by the corporation shortly after its organization. The members of the predecessor partnership, who became officers and directors of petitioner, secured loans without collateral from time to time from an old and well established San Francisco banking firm.
On January 28, 1891, about six months after incorporation, petitioner declared and paid a cash dividend of $20 per share. Other cash dividends paid in the first*2915 four years of petitioner's existence were as follows:
| December 28, 1892 | $ 20 per share. |
| February 1, 1893 | 10 per share. |
| February 7, 1894 | 10 per share. |
These dividends were all paid out of current earnings or earned surplus and their payment did not exhaust petitioner's surplus.
At a meeting of petitioner's directors held on February 7, 1894, the following resolution was adopted:
*151 On motion of Director George Liebes, seconded by Director Isaac Liebes, it was unanimously Resolved that a sufficient sum be transferred from the Surplus Fund Account on the Company's books to the credit of the Good Will Account so that the latter may be reduced to a debit of $300,000.
Petitioner's books of account for the period prior to 1904 were destroyed in the conflagration of 1906. In all its ledgers from 1904 to the present time good will has been carried at the figure of $300,000.
The good will acquired by petitioner from the predecessor partnership had an actual cash value of not less than $300,000.
The respondent in computing petitioner's statutory invested capital for the years 1917, 1918, and 1919, eliminated the good will of $300,000 shown on petitioner's*2916 books.
In computing taxes for 1919 the respondent included in petitioner's income, as subject to income and profits taxes, dividends received from domestic corporations in the amount of $22,344.50.
Petitioner's returns for the years involved were filed as follows:
| Return for year | Filed on or before |
| 1917 | June 15, 1918 |
| 1918 | June 16, 1919 |
| 1919 | June 15, 1920 |
Thereafter petitioner executed and filed with respondent several waivers extending the time for assessment and/or collection for the taxable years, the last of the series being dated December 1, 1925, and covering the years 1917, 1918, and 1919. It reads in part:
This waiver of the time for making any assessment as aforesaid shall remain in effect until December 31, 1926, and shall then expire except that it a notice of a deficiency in tax is sent to said taxpayer by registered mail before said date and (1) no appeal is filed therefrom with the United States Board of Tax Appeals then said date shall be extended sixty days, or (2) if an appeal is filed with said Board then said date shall be extended by the number of days between the date of mailing of said notice of deficiency and the date of final*2917 decision by said Board.
The deficiency notice upon which the petition is based was mailed by respondent on February 26, 1926.
OPINION.
ARUNDELL: The respondent has excluded from invested capital the amount of $300,000 claimed by petitioner to represent the value of good will acquired in 1890 from the predecessor partnership. When petitioner was organized in 1890, it issued all of its capital stock, having a par value of $1,000,000, for all the assets, tangible and intangible, and specially including good will, of the partnership. The amount at which good will was originally entered on petitioner's *152 books was not shown, due to the destruction of the early records, but the resolution of February 7, 1894, indicates that it was an amount greater than $300,000, at which figure it has since been carried.
We are satisfied from the evidence that the good will acquired for stock had a value of not less than the amount claimed. Witnesses qualified, by their long business experience in San Francisco as merchants and by their knowledge of the partnership business and acquaintance with the partners, to express an opinion, testified that the amount claimed as the value*2918 of good will is not excessive. On the basis of the testimony of the witnesses we have found as a fact that the good will acquired by petitioner had a cash value at the date of acquisition of not less than $300,000. This amount, subject to the limitation properly applicable, may be included in invested capital for the several years involved.
The respondent in his answer concedes error in including in taxable income for 1919 the dividends from domestic corporations received by petitioner in the amount of $22,344.50. This amount should be eliminated on recomputation. Counsel for petitioner, in his brief, concedes that under the rulings of the Board, the waivers of the statute of limitations executed by petitioner effect an extension of the period within which assessment may be made until the termination of this proceeding.
Judgment will be entered under Rule 50.