*276 Decision will be entered under Rule 50.
1. Abnormality -- Class -- Section 711 (b) (1) (J) (i), I. R. C. -- Excise taxes on chewing gum imposed during part of base period but not during taxable year, held not an abnormal class of deduction.
2. Id. -- A bad debt which resulted, not from transactions with customers or from advances for goods, but from a transaction not directly connected with the business, held abnormal as to class.
3. Abnormality -- Amount -- Section 711 (b) (1) (J) (ii). -- Sales promotion expenses held not separable in this case from other sales expenses for the purpose of section 711 (b) (1) (J) (ii).
*191 The Commissioner determined a deficiency of $ 28,363.64 in excess profits tax for the calendar year 1942. A carry-over from 1941 is claimed. The issues for decision are whether the petitioner is entitled to have the following deductions for the base period years disallowed: (1) Excise taxes on chewing gum for the base period years 1936, 1937, and 1938; (2) an amount charged off for 1939 as a worthless debt due *277 from the Alexander Corporation; and (3) so-called sales promotion expense for the years 1937, 1938, and 1939. The first two are claimed to be abnormal in class under section 711 (b) (1) (J) (i), while the last is claimed to be abnormal in amount under section 711 (b) (1) (J) (ii).
FINDINGS OF FACT.
The petitioner, a corporation, filed its tax return for 1942 with the collector of internal revenue for the first district of Pennsylvania.
It is engaged in the manufacture and sale of chewing gum. It keeps its books and files its returns upon an accrual method of accounting.
The Revenue Act of 1932 imposed a tax upon chewing gum, or substitutes therefor, equivalent to 2 per cent of the price for which sold by the manufacturer. That tax was repealed by the Revenue Act of *192 1938, effective June 30, 1938. The petitioner paid and bore the burden of excise taxes as follows while the law was in effect:
| 1932 | $ 5,701.04 |
| 1933 | 13,251.27 |
| 1934 | 18,578.50 |
| 1935 | 17,973.12 |
| 1936 | $ 20,628.70 |
| 1937 | 27,147.56 |
| 1938 | 12,281.45 |
No excise taxes of this kind were paid by the petitioner thereafter through 1942.
The petitioner claimed in its excess profits tax return for 1942 that the excise*278 taxes for the three base years should be disallowed as abnormal deductions under the provisions of section 711 (b) (1) (J) of the Internal Revenue Code. The Commissioner, in determining the deficiency, refused to disallow those deductions.
The excise taxes paid by the petitioner during the base years 1936 through 1938 were not of a class abnormal for the petitioner.
The Alexander Corporation was engaged in the production of advertising novelties. The petitioner was interested in those novelties in connection with its own advertising and placed several small orders in 1939 with the Alexander Corporation for ash trays bearing the Fleer trade-mark. It also advanced $ 12,008.98 to the Alexander Corporation as a separate transaction during the last three months of 1939. Those advances were not against orders. They were discontinued in the latter part of 1939 because it then appeared that the Alexander Corporation would not be successful. The petitioner also determined at that time that the advances to the Alexander Corporation would not be repaid and charged off the total amount thereof as a bad debt in 1939. The Commissioner allowed the deduction for 1939.
The petitioner, in its*279 return for 1942, claimed that the deduction just referred to should be disallowed as abnormal in the year 1939 under the provisions of section 711 (b) (1) (J). The Commissioner, in determining the deficiency, refused to disallow the deduction.
The deduction for the amount due from the Alexander Corporation was of a class different from deductions claimed and allowed during the base period years and also during the years 1940 through 1942 for bad debts on accounts due from customers in the ordinary course of the petitioner's business and from a deduction of $ 6,000 claimed and allowed on the petitioner's return for 1942 representing part of an advance on an order for goods.
The loss through a worthless debt due from the Alexander Corporation was a deduction of a class abnormal for the petitioner. It was not the consequence of an increase in the gross income or a decrease in the amount of any other deduction of the petitioner in its base *193 period, and it was not a consequence of a change at any time in the type, manner of operation, size, or condition of the business of the petitioner.
The petitioner made up an informal annual budget of expenditures to promote sales for a *280 number of years up to 1938, after which it used a written budget prepared each fall for the ensuing year. The amount to be expended on a particular plan was determined more or less arbitrarily by the management, in accordance with what it felt would be needed and would prove advantageous. Sales promotion is important in the business of the petitioner and considerable advertising is necessary, particularly to overcome the prejudices of parents and school teachers to the chewing of gum.
The principal product of the petitioner during the years 1932 until manufacture was terminated on account of the war in the latter part of 1942 was a penny juvenile chewing gum sold under the name "Dubble Bubble." It also made several other gum and candy products to be sold for a penny. The principal consumers of those products were children between the ages of 5 and 14. The petitioner engaged in a number of different advertising activities in order to keep its products before its changing group of consumers. Those activities were influenced by the facts that many of the consumers could not read well, and many were readily impressed by novelty advertising.
The petitioner distributed its products *281 through commission brokers, who sold to wholesalers. The wholesalers sold to retailers, who sold to the consumers. Chain stores buying from brokers sold directly to the consumers. The commission brokers usually handled other products in addition to those of the petitioner.
The following schedule shows a new classification of accounts adopted by the petitioner in January 1938, together with a compilation of earlier expenditures reclassified to correspond to the new accounts: *194
| Account No. | 1932 | 1933 | 1934 | 1935 | |
| 51 Selling Expenses: | |||||
| 5114 Bonus to Jobbers' Salesmen | $ 8,711.72 | $ 2,560.51 | |||
| 512 Premiums for Sales | |||||
| Contests | $ 1,142.07 | $ 222.77 | 101.10 | ||
| 517 Salesmens' Samples | |||||
| 53 Advertising -- General: | |||||
| 531 Advertising Department | |||||
| 532 Fieldmen | 34,801.94 | 26,779.95 | 39,045.24 | 14,878.43 | |
| 533 Surveys and Market | |||||
| Analyses | |||||
| 534 Misc. Agency Charges | 12,000.00 | 8,150.00 | 3,410.00 | ||
| 535 Trade Assoc. Dues and | |||||
| Expenses | |||||
| 54 Premiums, Supplies, etc.: | |||||
| 540 Self Liquidating Premiums | |||||
| 541 Premiums in Deals -- Fleer | |||||
| 542 Premiums in Deals -- Other | 5,245.10 | 36,809.08 | 14,935.13 | ||
| 543 Premiums to Jobbers | |||||
| 544 Premiums to Consumers | |||||
| 545 Free Goods | |||||
| 546 Samples -- Trade | 22.50 | ||||
| 547 Samples -- Consumers | 3,817.23 | 4,237.91 | 7,471.59 | ||
| 548 Novelty Advertising | 21,307.72 | 40,697.94 | 15,368.85 | 10,359.68 | |
| 549 Premium Samples Purchased | |||||
| 55 Sales Promotion: | |||||
| 552 Controlled Outlets | |||||
| 553 Pamphlets & Printed Matter | |||||
| 554 Dealer and Jobber Helps | 7,982.54 | 8,978.26 | 11,461.98 | 20,349.97 | |
| 555 Package Inserts | 6,417.99 | 5,198.53 | 7,553.19 | ||
| 556 Coupons | |||||
| 557 Coupons -- Newspapers | |||||
| 558 Conventions and Exhibits | |||||
| 559 Publicity | |||||
| 56 Media: | |||||
| 561 Magazines | 7.50 | ||||
| 562 Newspapers | 135.28 | 6.00 | 109.00 | ||
| 563 Trade Papers | 202.00 | 15.00 | 146.26 | ||
| 564 Programs and | |||||
| Complimentary Advertising | |||||
| 565 Direct Mail | 7,128.03 | 1,422.44 | 1,589.42 | 525.09 | |
| 566 Motion Pictures | 1,408.95 | 225.43 | 34.25 | ||
| 567 Radio | |||||
| 568 Car Card Advertising | |||||
| 581 Sales Development and Research | |||||
| Total | 96,343.75 | 101,179.33 | 131,586.42 | 63,864.07 |
| Account No. | 1936 | 1937 | 1938 | 1939 | |
| 51 Selling Expenses: | |||||
| 5114 Bonus to Jobbers' | |||||
| Salesmen | $ 96.53 | $ 1,479.25 | $ 350.57 | $ 649.05 | |
| 512 Premiums for Sales | |||||
| Contests | 1,301.05 | ||||
| 517 Salesmens' Samples | 1,500.00 | 780.18 | 704.38 | ||
| 53 Advertising -- General: | |||||
| 531 Advertising Department | 2,175.99 | 3,545.40 | |||
| 532 Fieldmen | 13,889.56 | 5,695.21 | 2,764.36 | 2,714.57 | |
| 533 Surveys and Market | |||||
| Analyses | 18.50 | 192.91 | 1.63 | ||
| 534 Misc. Agency Charges | 161.00 | 96.84 | 1,196.50 | 1,402.00 | |
| 535 Trade Assoc. Dues and | |||||
| Expenses | 542.17 | ||||
| 54 Premiums, Supplies, etc.: | |||||
| 540 Self Liquidating Premiums | |||||
| 541 Premiums in | |||||
| Deals -- Fleer | 32,781.11 | 24,996.34 | 25,462.94 | ||
| 542 Premiums in | |||||
| Deals -- Other | 16,041.57 | 43,886.65 | 21,183.41 | 22,745.39 | |
| 543 Premiums to Jobbers | 20,709.87 | 34,566.21 | 8,075.86 | ||
| 544 Premiums to Consumers | 166.67 | 313.61 | 806.36 | ||
| 545 Free Goods | |||||
| 546 Samples -- Trade | 151.31 | 3,008.77 | 1,123.09 | 1,208.25 | |
| 547 Samples -- Consumers | 24,015.60 | 2,455.73 | 2,231.22 | ||
| 548 Novelty Advertising | 2,260.61 | 1,068.21 | 725.78 | 3,394.45 | |
| 549 Premium Samples Purchased | (20.06) | 8.97 | |||
| 55 Sales Promotion: | |||||
| 552 Controlled Outlets | 2,463.12 | 7,294.58 | |||
| 553 Pamphlets & | |||||
| Printed Matter | 1,455.23 | 3,071.42 | |||
| 554 Dealer and Jobber Helps | 17,052.57 | 1,925.90 | 3,971.90 | 8,289.33 | |
| 555 Package Inserts | 1,273.02 | 6,572.60 | 4,802.27 | 1,152.53 | |
| 556 Coupons | 9,413.80 | 14,350.67 | 1,856.42 | 26,914.13 | |
| 557 Coupons -- Newspapers | 114,873.88 | 91,238.59 | 37,759.97 | ||
| 558 Conventions and Exhibits | 230.00 | 797.45 | 2,716.82 | ||
| 559 Publicity | 675.03 | ||||
| 56 Media: | |||||
| 561 Magazines | 10,446.51 | 17,339.53 | 46,367.44 | 41,465.53 | |
| 562 Newspapers | 978.71 | 1,150.60 | 3,574.11 | 135.33 | |
| 563 Trade Papers | 223.27 | 967.05 | 7,649.82 | 16,446.61 | |
| 564 Programs and | |||||
| Complimentary | |||||
| Advertising | 159.00 | 490.50 | 487.59 | 769.26 | |
| 565 Direct Mail | 781.82 | 4,701.14 | 4,244.23 | 11,084.39 | |
| 566 Motion Pictures | 5.85 | ||||
| 567 Radio | 3,532.18 | 40.00 | 3,029.02 | ||
| 568 Car Card Advertising | 206.50 | 1,557.80 | |||
| 581 Sales Development and Research | 25,060.75 | 9,450.38 | 2,130.78 | 4,463.60 | |
| Total | 101,728.71 | 308,578.90 | 263,883.57 | 239,525.93 |
| Account No. | 1940 | 1941 | 1942 | |
| 51 Selling Expenses: | ||||
| 5114 Bonus to Jobbers' Salesmen | $ 474.10 | $ 1,420.10 | $ 61.40 | |
| 512 Premiums for Sales | ||||
| Contests | 9,549.39 | |||
| 517 Salesmens' Samples | 684.05 | 534.52 | 49.70 | |
| 53 Advertising -- General: | ||||
| 531 Advertising Department | 2,385.39 | 955.89 | 5,179.75 | |
| 532 Fieldmen | 6,112.78 | 11,835.76 | 6,951.97 | |
| 533 Surveys and Market | 1,775.04 | 716.00 | ||
| Analyses | ||||
| 534 Misc. Agency Charges | 65.60 | 500.00 | ||
| 535 Trade Assoc. Dues and | ||||
| Expenses | ||||
| 54 Premiums, Supplies, etc.: | ||||
| 540 Self Liquidating Premiums | (234.32) | (1,433.88) | 8.63 | |
| 541 Premiums in Deals -- Fleer | 16,502.01 | 13,510.24 | 51.61 | |
| 542 Premiums in Deals -- Other | 28,349.40 | 31,050.38 | 6,880.99 | |
| 543 Premiums to Jobbers | 4,704.06 | 24,254.49 | 346.53 | |
| 544 Premiums to Consumers | 2,811.39 | 3,629.72 | 1,667.88 | |
| 545 Free Goods | 12.40 | 3.15 | 4.98 | |
| 546 Samples -- Trade | 1,519.35 | 1,132.93 | 64.04 | |
| 547 Samples -- Consumers | 1,239.00 | 1,076.49 | 596.95 | |
| 548 Novelty Advertising | 1,654.32 | 1,796.50 | 5,999.42 | |
| 549 Premium Samples Purchased | 2.06 | (.51) | 3.00 | |
| 55 Sales Promotion: | ||||
| 552 Controlled Outlets | 593.30 | 450.00 | ||
| 553 Pamphlets & Printed Matter | 263.49 | 193.50 | 49.50 | |
| 554 Dealer and Jobber Helps | 7,007.00 | 2,707.38 | 950.77 | |
| 555 Package Inserts | 387.61 | 10.50 | 372.88 | |
| 556 Coupons | 108.54 | 1,573.60 | 415.79 | |
| 557 Coupons -- Newspapers | ||||
| 558 Conventions and Exhibits | 1,542.82 | 1,870.14 | 369.92 | |
| 559 Publicity | 547.28 | 81.13 | 258.66 | |
| 56 Media: | ||||
| 561 Magazines | 818.80 | 724.93 | 68,996.50 | |
| 562 Newspapers | 139.93 | 178.52 | ||
| 563 Trade Papers | 5,633.46 | 6,064.48 | 14,976.75 | |
| 564 Programs and | ||||
| Complimentary Advertising | 876.69 | 736.15 | 373.56 | |
| 565 Direct Mail | 4,925.38 | 4,648.10 | 3,345.47 | |
| 566 Motion Pictures | 76.25 | |||
| 567 Radio | 143,868.87 | 126,368.89 | 1,438.71 | |
| 568 Car Card Advertising | ||||
| 581 Sales Development and Research | 2,195.28 | 9,523.30 | 30,858.58 | |
| Total | 246,514.47 | 245,510.13 | 150,952.46 |
*284 *195 Account No. 5114, "Bonus to Jobbers' Salesmen," covered cash bonuses paid to wholesalers' salesmen for their help in advancing the sales of the petitioner's products by doing such things as setting up window displays, putting up advertising signs, and placing boxes of the petitioner's products with retailers through sales. The amount of the bonus would depend upon the nature of the job performed and the number of boxes of the petitioner's products placed.
Account No. 532, "Fieldmen," accounted for items related to the employees of the petitioner who worked in the field independently, or in conjunction with a wholesaler, for the purpose of increasing the petitioner's sales through the presentation of an advertising program. They normally did not make sales, but occasionally they would take an order and turn it over to a wholesaler.
The petitioner developed selling plans, called "deals," for the purpose of increasing the sale of its products. It gave, as a part of those plans, various "premiums" to the wholesalers to be distributed to the retailers. Those premiums consisted of two types, i. e. (1) a number of extra pieces of another product manufactured by the petitioner*285 and designated "Premiums in Deals -- Fleer" -- account No. 541, and (2) an item or items other than a product manufactured by the petitioner; for example, a steel utility chest, a window cleaner, an ash tray, or novelties, and designated "Premiums in Deals -- Other" -- account No. 542. The retailers generally knew when premiums would be included with products which they purchased. One of the purposes of including the premiums consisting of other products manufactured by the petitioner was to enhance the size of the display by the retailer of the petitioner's products, thus advertising the new product and making the display of the old one more important. Such premiums also served as an inducement to retailers to handle the petitioner's products, since they were allowed to retain the amount received from the sale of the premiums given to them free of charge. Premiums such as paper eye shades and paper masks were passed on to the retailer, who, in turn, would give them to children as an inducement to purchase the petitioner's products.
Account No. 543, "Premiums to Jobbers," represented the cost of articles, as distinguished from cash, delivered to a wholesaler to be given by him*286 to his salesmen as rewards for attaining various sales objectives of the petitioner similar to those for which cash bonuses were paid. Those premiums consisted of pens, pencils, watches, knives, shirts, ties, and small radios.
Account No. 548, "Novelty Advertising," as used by the petitioner, recorded two types. The first type was directed to the consumer and consisted of the distribution of such things as blotters, paper airplane gliders, eye shades, masks, and paper mustaches. The second type *196 was to develop the good will of the wholesalers and their salesmen, as well as to advertise the products of the petitioner. It consisted of such things as cigarette lighters, tie clasps, and paper bill clips, all bearing advertisements of the petitioner's products. No sales or purchases were required in connection with the second type.
Account No. 552, "Controlled Outlets," refers to corporate or cooperative chains which were able to enforce a greater control over their store operations than the independent retailers as a group. The expenses appearing under that account consisted of the salary, traveling expenses, and cost of printed material used by an employee of the petitioner*287 for the purpose of developing that type of outlet.
Account No. 554, "Dealer and Jobber Helps," recorded the cost of various items distributed to dealers, for the purpose of stimulating sales, such as window cards and posters, counter easels, decalcomanias, and metal signs.
Account No. 553, "Pamphlets and Printed Matter," recorded the cost of various printed materials other than dealer and jobber helps, such as portfolios of pictures given to school teachers in exchange for wrappers of "Dubble Bubble" gum.
Account No. 555, "Package Inserts," recorded the cost of printed advertising material inserted in the boxes containing the petitioner's products.
Account No. 557, "Coupons -- Newspapers," accounted for expenditures in connection with coupons printed in newspapers. Those coupons entitled the bearer to obtain two pieces of gum for the price of one and enabled the petitioner to distribute samples without depriving the local retailer of sales. The wholesalers paid the retailers 1 cent for each coupon presented and then received a credit of 1 1/4 cents for each coupon turned in to the petitioner. The extra 1/4 was for handling. Account No. 557 was debited with the credits given wholesalers*288 and also with the cost of publishing the coupons in the newspapers.
Account No. 556, "Coupons," accounted for all other coupons such as those printed in magazines and on cards which were distributed to children. All or some of those coupons entitled the holder to receive a piece of gum from a retailer without any charge or purchase. Those coupons were redeemed in the same manner as the newspaper coupons.
Account No. 563, "Trade Papers," recorded expenditures made in connection with advertisements appearing in the trade journals of confectionery and tobacco distributors, dental trade journals, and school trade journals read by school teachers.
Account No. 581, "Sales Development & Research," recorded expenditures made for the development of new packages, new boxes, and similar items, but not for the development of new products.
*197 The following table shows the gross of sales, profits, and income, as well as the totals of the so-called sales promotion expenses, for the years 1932 through 1942:
| Gross profit | Total gross | So-called sales | ||
| Year | Gross sales | from sales | income | promotion |
| expenses | ||||
| 1932 | $ 753,102.39 | $ 363,408.17 | $ 369,603.00 | $ 96,343.75 |
| 1933 | 797,626.15 | 365,118.60 | 370,060.93 | 101,179.33 |
| 1934 | 1,084,989.88 | 526,852.60 | 554,004.33 | 131,586.42 |
| 1935 | 1,138,453.04 | 506,340.31 | 536,834.47 | 63,864.07 |
| 1936 | 1,240,162.79 | 533,134.94 | 571,967.16 | 101,728.71 |
| 1937 | 1,612,958.84 | 809,413.61 | 846,823.49 | 308,578.90 |
| 1938 | 1,386,264.66 | 677,238.76 | 705,325.12 | 263,883.57 |
| 1939 | 1,419,780.53 | 741,519.68 | 754,236.24 | 239,525.93 |
| 1940 | 1,538,117.01 | 795,425.10 | 821,227.66 | 246,514.47 |
| 1941 | 1,709,435.43 | 828,536.90 | 807,627.70 | 245,510.13 |
| 1942 | 1,673,022.76 | 686,985.35 | 712,187.33 | 150,952.46 |
*289 The petitioner, in its return for 1942, claimed that the items designated above as sales promotion expenses for the years 1937, 1938, and 1939 should be disallowed as abnormal deductions under section 711 (b) (1) (J) to the extent that they exceeded 125 per cent of the average of similar expenditures in the four years immediately preceding each of the base period years or to the extent that they exceeded similar expenditures in the taxable year, whichever excess was smaller. The Commissioner, in determining the deficiency, held "that the abnormality claimed under section 711 (b) (1) (J) of the Internal Revenue Code has not been established." He disallowed claims for refund for the years 1941 and 1942.
The stipulated facts are incorporated herein by this reference.
OPINION.
The petitioner first contends that excise taxes which it paid during the base years 1936, 1937, and 1938 were abnormal in class within the meaning of section 711 (b) (1) (J) (i) of the Internal Revenue Code and should be disallowed as deductions for those years in computing its excess profits credit. The provision in question is a remedial one, which should be construed reasonably to give the relief intended. *290 Green Bay Lumber Co., 3 T. C. 824, 830. The petitioner paid excise taxes during the years 1932 through 1938, but apparently paid no other taxes of that type at any time up to 1942. It would get no benefit under section 711 (b) (1) (J) (ii) because the deduction for excise taxes in each of the years 1936, 1937, and 1938 was not in excess of 125 per cent of similar deductions during the four years preceding each of those years. The petitioner, obviously aware of this, makes its claim under section 711 (b) (1) (J) (i).
The petitioner argues that the purpose of section 711 (b) (1) (J) was to permit a taxpayer computing its excess profits credit on the *198 income method to eliminate all unusual deductions of the base period years so that the average income of those years might be used to measure the normal income of the excess profits tax years, computed on a comparable basis, to the end that only true excess profits would be subject to tax. The petitioner paid no excise taxes during the excess profits tax years and the petitioner's argument is logical. However, Congress has not provided that every deduction of a base year which does not have a *291 counterpart in the excess profits tax year shall be disallowed. It has provided that, under regulations for the determination of the classification of deductions, "deductions of any class shall not be allowed if deductions of such class were abnormal for the taxpayer." Regulations 112, section 35.711 (b)-2 is directly opposed to the petitioner's contention, since it provides, inter alia, that a class of deductions is abnormal only if the taxpayer had no deductions of that class in the four preceding taxable years, whereas the petitioner had deductions in each of the four preceding years. The provision of the regulations just referred to has been held invalid as applied to section 711 (b) (1) (H). City Auto Stamping Co., 7 T.C. 354">7 T. C. 354.
The regulations contain no other aid to the solution of the present problem. There is nothing in the record to show that these deductions for excise taxes were of a class abnormal for the petitioner except that such taxes were imposed upon the petitioner only during the seven years 1932 through 1938. The Court has not been told how they relate to or are unlike other taxes paid by the petitioner. Congress, in its *292 efforts to collect sufficient revenues, imposes various kinds of taxes. It has imposed excise taxes from time to time on manufactured articles, and one can not fairly say that the payment of such taxes by a manufacturer of chewing gum was extraordinary, unusual, or something which it might not reasonably expect in the normal operation of its business. 1 The circumstance that the Government abandoned that tax and used other methods to collect revenues in the tax years does not necessarily make the excise tax of the base years abnormal. The finding that the deductions for excise taxes were not of a class abnormal to the petitioner disposes of this issue without the necessity of discussing other limiting provisions.
The petitioner next claims that the deduction for the worthless debt due from the Alexander Corporation also gave rise to an abnormality under section 711 (b) (1) (J) (i). The respondent argues that that deduction should be classified with other*293 deductions for bad debts. The petitioner points out, however, that the other deductions arose from the ordinary operation of its business on accounts due it from customers who bought its product and then failed to pay, whereas *199 this bad debt arose in quite a different way from money advanced to one who was not a customer and who was not being paid thereby for furnishing goods to the petitioner. This difference justifies a separate classification of these deductions. Green Bay Lumber Co., supra. The evidence fairly preponderates in favor of the petitioner's contention that a deduction of this kind was abnormal for the petitioner. The record shows that it made advances to others from whom it bought goods, but in all of those cases the advances were against goods ordered, whereas in the present case the advances had no connection with goods ordered, but were made for some purpose not directly connected with the business of the petitioner or necessary, normal, or usual in that business.
The petitioner's final contention is that an abnormality in amount under section 711 (b) (1) (J) (ii) existed for the base years 1937, 1938, and 1939 with respect*294 to what it describes to the Court as sales promotion expenses. It seeks to have those expenditures classified separately from others of its sales expenses. Its sales manager testified that all of the items to which it refers completely and exclusively represent sales promotion expenses incurred primarily to develop markets for future sales, to advance the relative position of the company in the field, and to increase demand for the products of the company, whereas other sales expenses were incurred directly in connection with actual sales. The witness described in varying degrees of completeness the type of use made of some of the expenditures recorded in a number, but not all, of the accounts in question. Some of the accounts are inadequately described and others are described only by name. Many of the expenditures listed in the accounts in question undoubtedly had a two-fold purpose and effect, to wit, to bring about current sales and to promote future sales. Although it may be true, as the sales manager testified, that the expenditures were made primarily to develop future sales, nevertheless, a number of them had a direct tie-in with current sales, and almost every one, *295 if not every one, of them might have stimulated current sales. For example, awards of premiums and bonuses were based upon current sales. While sales promotion expenses might be separately classified from direct sales expenses for bookkeeping purposes, the first question under this issue is whether they should be separately classified for the purpose of section 711 (b) (1) (J) (ii). That question, of course, is one for the Court rather than the sales manager.
Congress, endeavoring to impose the excess profits tax upon that part only of the income of the excess profits tax years which exceeded the normal income of the taxpayer, used the average of the base period years as the norm. It recognized that an individual taxpayer might have had some deduction during that period which would be abnormal in class or abnormal in amount and thus prevent the net income of *200 that year from representing true normal. So Congress provided in section 711 (b) (1) (J) for the elimination of such deductions to the extent that they were abnormal, yet, at the same time limiting this benefit in various ways. For example, it wanted to make sure that what would otherwise appear to be abnormal was*296 not large merely because of a diminution of some other deduction or because of an increase in gross income and was not due to a change in size or manner of operation of the business. Sec. 711 (b) (1) (K) (ii). It also limited it by comparisons with similar deductions in the tax years. Sec. 711 (b) (1) (K) (iii). The Court, in applying section 711 (b) (1) (J) and (K) should, therefore, have a sufficiently comprehensive view of the activities of the taxpayer to make sure that the purpose of Congress will be carried out.
The Court is asked to look at this group of items alone and to decide that they constitute a separate class for the purpose of section 711 (b) (1) (J) (ii); the abnormality in their amount, which would then appear mathematically, was not a consequence of an increase in the gross income or a decrease in the amount of some other deduction of the taxpayer in the base period, and was not a consequence of a change at any time in the manner of operation or size of the business engaged in by the taxpayer; and, finally, the extent to which those abnormalities exceeded similar deductions for the taxable years. The evidence does not justify a finding that the so-called sales*297 promotion expenses should be classified separately from other expenses for the purpose of section 711 (b) (1) (J) (ii) and indicates that perhaps no additional evidence could be offered which would justify the classification sought. All of the expenditures during the base years which were connected with selling were made to sell the petitioner's product. The purpose of each was closely related to that of every other one. Cf. Frank Shepard Co., 913">9 T. C. 913. It appears that almost all, if not all, of them tended to stimulate current sales. It does not appear that the effect which they had upon future sales endured beyond the year in which they were made. Sales expenses, even sales promotion expenses, which did not have an effect upon sales beyond the year in which made, but only tended to affect sales of that year, would not be abnormal within the intendment of Congress. To eliminate them would defeat rather than advance the purpose which Congress had in mind when it imposed the excess profits tax and allowed the benefits of section 711 (b) (1) (J) (i). It would be impossible on the present record, even if appropriate, to allocate the expenditures*298 between current and future sales in proportion to the effect which they had upon each. In short, the relationship between the expenditures in question and other selling expenses is so intimate as to preclude a separate classification for present purposes.
It might be helpful to know what other expenditures the petitioner *201 made during the base and tax years in its efforts to sell its products. The petitioner has made no effort to present evidence on that point. That situation is the petitioner's own fault. However, it appears that the petitioner paid its salesmen commissions, it undoubtedly had other direct selling expenses in the base years, as well as the tax years, and, as has been said above, some of the so-called direct selling expenses and some, or all, of the so-called sales promotion expenses of this taxpayer are too closely related to be separately classified for the purpose of section 711 (b) (1) (J). This is a complete answer to this contention of the petitioner, because it does not claim any benefit except in case the items which it has referred to as sales promotion expenses can be classified separately from other sales expenses. The Court is also unable*299 to hold on the present record that the limitations of (K) (ii) and (iii) do not apply to deny any benefits which would otherwise be available.
Decision will be entered under Rule 50.
Footnotes
1. There was a similar tax in effect from 1917 through 1921.↩