*2056 Taxpayer held not entitled to classification as a personal-service corporation for the years 1919 and 1920.
*37 Before GRAUPNER, TRAMMELL, and PHILLIPS.
This is an appeal from the determination of a deficiency in income and profits taxes in the amount of $2,344.78 for the calendar years *38 1919 and 1920. The only issue involved is whether the taxpayer is entitled to personal-service classification.
FINDINGS OF FACT.
The taxpayer is an Ohio corporation, organized in 1912, with its principal office at Toledo, and is engaged in the business of conducting an insurance agency.
During the years here involved the taxpayer's income consisted of fees and commissions on the writing of insurance policies. It represented and wrote insurance policies for a number of insurance companies. Business was solicited by some of its stockholders, foreign brokers, office brokers, and subagents.
The president of the taxpayer corporation testified that the gross income from commissions for 1919 and 1920 was as follows:
| 1919 | 1920 | |
| Produced by stockholders | $92,892.46 | $107,723.49 |
| Produced by foreign brokers | 12,389.67 | 7,589.91 |
| Produced by office brokers | 683.63 | 2,063.37 |
| Produced by subagents | 331.98 | 597.11 |
| Total | 106,297.74 | 117,973.88 |
*2057 Schedules attached to the income-tax returns for 1919 and 1920, showing income produced by office brokers and agents, are as follows:
| Gross profits. | Commissions paid agents | Net returns to B.F. & C. Co. | |
| 1919. | |||
| C. P. Curtis | $78.03 | $46.82 | $31.21 |
| E. W. Zehner | 392.60 | 235.56 | 157.04 |
| C. D. Wernert | 114.14 | 72.32 | 41.82 |
| F. W. Holewinski | 98.86 | 62.58 | 36.28 |
| Charles G. Smith | 11,987.69 | 7,605.24 | 4,382.45 |
| 12,671.32 | 8,022.52 | 4,648.80 | |
| 1920. | |||
| C. D. Wernert | 422.43 | 267.40 | 155.03 |
| C. P. Curtis | 73.85 | 44.31 | 29.54 |
| F. W. Holewinski | 823.05 | 520.99 | 302.06 |
| L. P. Malone | 682.22 | 341.11 | 341.11 |
| J. A. Atkinson | 61.82 | 30.91 | 30.91 |
| Charles G. Smith | 15,314.74 | 9,408.50 | 5,906.24 |
| 17,378.11 | 10,613.22 | 6,764.89 |
The persons listed above were not stockholders.
Office brokers are persons employed on full time by the taxpayer and are paid a salary and commission. They are not stockholders. Foreign brokers or outside brokers are those located in other States but licensed to do business in the State of Ohio. Approximately 90 per cent of the taxpayer's business which was handled through outside brokers had originally been procured and handled by the*2058 taxpayer *39 itself, but during the years here involved, for business reasons, had been handled through the offices of the outside brokers and the commissions divided between such brokers and the taxpayer.
The corporation had an authorized capital stock of $75,000, of which only $48,100 was issued. It was held as follows:
| Stockholders. | Beginning of 1919. | End of 1919. | End of 1920. |
| L. L. D. Chapman | $19,000.00 | $19,000.00 | $22,100.00 |
| Calvin Barker | 18,100.00 | 18,100.00 | |
| J. D. Nolan | 5,000.00 | 5,000.00 | 5,000.00 |
| F. J. Rogers | 1,000.00 | 1,000.00 | 1,000.00 |
| A. H. Hunker | 4,000.00 | ||
| C. F. Wall, Jr | 1,000.00 | 1,000.00 | 1,000.00 |
| P. H. Chapman | 2,000.00 | 2,000.00 | |
| J. J. Lovett | 1,000.00 | 1,600.00 | |
| Barker and L. L. D. Chapman, trustees | 1,000.00 | 1,000.00 | |
| L. L. D. Chapman and J. D. Nolan, trustees | 14,400.00 | ||
| Total | 48,100.00 | 48,100.00 | 48,100.00 |
Of the above stockholders, L. L. D. Chapman, Calvin Barker, J. D. Nolan, F. J. Rogers, J. J. Lovett, and P. H. Chapman devoted their entire time to the conduct of the business of the taxpayer.
When the corporation was organized in 1912 it took over the business which had been successfully operated*2059 since 1878 by a partnership. The partnership in 1912 was composed of L. L. D. Chapman, Calvin Barker, and Andrew Hunker. The corporation issued $34,000 of its capital stock for the good will of the partnership and the balance of the stock for the tangible assets, including the bank account.
The taxpayer borrowed no money during the years 1919 and 1920.
In April and October, 1919 and 1920, the premiums on policies written by the taxpayer and the payments made by it to insurance companies in advance of receipt of the premiums from policy holders were as follows:
| Premiums on policies written. | Advanced to insurers. | |
| April, 1919 | $45,965.73 | $3,504.00 |
| October, 1919 | 25,570.93 | 4,031.52 |
| April, 1920 | 48,602.57 | 10,918.41 |
| October, 1920 | 42,259.78 | 12,129.13 |
At the close of the year 1919, the taxpayer's books showed $102,216.73 due from agents, customers, and brokers, and $93,620.83 due to insurance companies, agents, and brokers.
DECISION.
The determination of the Commissioner is approved.