*2522 INVESTED CAPITAL. - Invested capital, within the meaning of section 326, Revenue Act of 1918, is the capital actually paid in to the corporation by the stockholders plus earned surplus and undivided profits.
*1140 The respondent determined a deficiency of $4,782.10 in income and profits taxes against the petitioner for the six-month period ending June 30, 1920. In seeking redetermination, petitioner alleges that it is affiliated with several subsidiary corporations by reason of its ownership of all of the capital stock of the subsidiaries, and that respondent erred in determining the invested capital of the affiliated group by failing to include therein the invested capital of the affiliated members, and making his determination solely on the invested capital of petitioner. No evidence was introduced by either party at the hearing, but the parties have agreed upon and filed a written stipulation of facts, which we adopt as our findings of fact.
FINDINGS OF FACT.
The deficiency of $4,782.10 is for the six-month period ended June 30, 1920, but*2523 the only tax liability in controversy is for the period February 26, 1920, to June 30, 1920, during which time the petitioner was affiliated with the companies named below.
The only issue concerns the method of computing the consolidated invested capital of a group consisting of five corporations as follows:
1. J. R. Raible Co., an Ohio corporation.
2. Tuscaloosa Cooperage Co., an Alabama corporation.
3. Gadsden Cooperage Co., an Alabama corporation.
4. Blountsville Cooperage Co., an Alabama corporation.
5. Etowah Cooperage Co., a Georgia corporation.
Companies Nos. 2 and 5 were affiliated for the period May 1, 1919, to February 26, 1920; companies Nos. 1, 2, 3, 4, and 5 were affiliated from February 26, 1920, to June 30, 1920, inclusive, the period in issue, company No. 1 having purchased all the stock of the other companies on February 26, 1920.
The consolidated net income of the five companies for the period February 26, 1920, to June 30, 1920, is $29,663.95.
*1141 As of January 1, 1920, and continuing through the six-month period ended June 30, 1920, the authorized and outstanding capital stock of the respective companies was as follows:
| 1. J. R. Raible Co | $25,000 |
| 2. Tuscaloosa Cooperage Co | 50,000 |
| 3. Gadsden Cooperage Co | 10,000 |
| 4. Blountsville Cooperage Co | 20,000 |
| 5. Etowah Cooperage Co | 20,000 |
| Total | 125,000 |
*2524 As of January 1, 1920, and as of June 30, 1920, the earned or paid-in surplus accounts of the respective corporations were as follows:
| Company | Jan. 1, 1920 | June 30, 1920 |
| 1. The J. R. Raible Co | $2,179.79 | $1,293.17 |
| 2. Tuscaloosa Cooperage Co | 10,565.95 | 17,404.97 |
| 3. Gadsden Cooperage Co. (deficit) | -12,581.61 | -13,355.94 |
| 4. Blountsville Cooperage Co | 6,873.98 | 3,401.19 |
| 5. Etowah Cooperage Co. (deficit) | -4,495.56 | -3,078.89 |
The books of the companies were closed as of December 31, 1919, and June 30, 1920, but were not closed at any intermediate dates.
The average inadmissible assets for the period in issue are $84,015.34, and the average admissible and inadmissible assets are $345,421.34.
OPINION.
BLACK: The taxable period in controversy is from February 26, 1920, to June 30, 1920. During this period the petitioner was affiliated with four subsidiary corporations by reason of its ownership of all the capital stock of the subsidiaries. The combined authorized and outstanding capital stock of the affiliated companies was $125,000 divided as shown in the stipulated facts, and in addition thereto the surplus accounts of the corporations were*2525 as stated in the stipulation.
Petitioner claims that in determining its excess-profits tax it is entitled to an invested capital of $148,036.73, arrived at by adding together the authorized and outstanding capital stock and surplus of each of the affiliated corporations, and complains that respondent only allowed the affiliated group as invested capital the invested capital of the petitioner, the parent corporation, in the sum of $20,521.66. There is nothing in the record to show how the respondent determined the amount of the invested capital. We have not been furnished with the statement that usually accompanies a deficiency letter, nor has the Bureau letter of February 9, 1926, referred to in *1142 the deficiency letter, been filed or included in the stipulation of facts.
Petitioner has apparently proceeded upon the idea that authorized and outstanding capital stock and invested capital are the same, but this is not the law. Under section 326, Revenue Act of 1918, "invested capital" means cash, or property at its actual cash value, bona fide paid in for stock or shares; and certain paid-in or earned surplus and undivided profits. *2526 ; .
There is nothing before us to show what the actual invested capital of this group of corporations was. It is possible that the full par value was paid and received for some of the capital stock. Some may have been issued for intangibles, in which event under section 326(a)(5) they could not be counted at a greater value than 25 per cent of the total outstanding capital stock of the corporation, and some may have been received as stock dividends. Under these circumstances we can not assume that outstanding authorized capital stock and invested capital are the same. If invested capital of petitioner for the taxable year was greater than that which the Commissioner has allowed, petitioner should have proved it.
We can not assume the facts and petitioner has failed to prove what the invested capital of the affiliated group was.
In , we said:
We can not make assumptions as to the facts, and in the absence of evidence to show that the determination of the respondent is erroneous in*2527 amount, we must approve his determination, although it is shown that it is based on an erroneous principle.
Judgment will be entered for the respondent.