*2959 Where corporations are affiliated, whether on the basis of the ownership or control of stock of one or more corporations by another corporation, or on the basis of ownership or control of the stock of two or more corporations by the same interests, or where a combination of the two classes of affiliation is involved, the limitation prescribed by the Revenue Acts of 1917, 1918, and 1921 as to the amount of intangibles acquired for stock which may be included in invested capital is measured by the total outstanding capital stock of the affiliated group, after eliminating intercompany holdings. Gould Coupler Co.,5 B.T.A. 499">5 B.T.A. 499.
*570 These proceedings were consolidated and submitted for decision on an agreed stipulation of facts. The Commissioner determined deficiencies in income and profits tax for the fiscal years ending March 31, 1918, 1919, 1922, and 1923 of $112, 090.17, $219,272.17, $195,221.62 and $3,932.08, respectively.
FINDINGS OF FACT.
John Morrell & Co., a Maine corporation, with its principal place of business and*2960 office at Ottumwa, Iowa, is the principal or parent company operating two meat-packing plants, one at Ottumwa, Iowa, and one at Sioux Falls, S. Dak. John Morrell & Co., a Delaware corporation, markets the products of the Maine corporation. The Kittery Realty Co. owns the buildings, equipment, and refrigeration cars for the use of the Maine corporation. The Yorkshire Creamery Co. takes care of the butter fat and milk produced by the Maine corporation. The Ottumwa Serum Co. produces healthy animals for slaughter by the Maine corporation.
The Maine corporation owns practically all the stock of the Delaware corporation. The Kittery Realty Co. owns practically all the stock of the Yorkshire Creamery Co. and the Ottumwa Serum Co. The stock of the Maine corporation and the Kittery Realty Co. is held by the same stockholders in substantially the same proportions. The several corporations, heretofore mentioned, are affiliated for the fiscal years ended March 31, 1918, and March 31, 1919, in accordance with the provisions of the Revenue Acts of 1917 and 1918 and for the fiscal years ended March 31, 1922, and March 31, 1923, in accordance with the provisions of the Revenue Act of 1921, *2961 and any deficiency that may be determined shall be assessed to the Maine corporation.
In 1827 John Morrell & Co., a copartnership, started in the business of pork and beef packers, with especial reference to the curing of hams and bacon, operating continuously until December 31, 1915, when its entire affairs were transferred to the Maine corporation, the interests remaining after incorporation the same as before.
The authorized, issued and outstanding stock of the Maine corporation is 166,611 shares, of a par value of $10 a share, a total of $1,666,110 at December 31, 1915, the date of reorganization, and for the years here in controversy.
The entire stock was issued for a mixed aggregate of tangibles and intangibles, taking over all the assets and assuming all the liabilities of every kind and nature in any manner connected with or relating to the property, or growing out of the property of John Morrell & Co., a copartnership.
The tangible property alone had a value at date of transfer of not less than $2,101,088.45.
*571 The value of intangibles transferred, as agreed to and accepted by the parties hereto, was $2,165,945.07.
The total outstanding stock of*2962 the affiliated group, as a unit, after eliminating all intercompany holdings for all years here in controversy, is $3,236.900.
The admitted and agreed, accrued, consolidated, taxable net income for the following periods is -
| Period ended | Amount |
| (a)(1) March 31, 1918, at 1917 rates of tax | $3,215,899.65 |
| (2) For excess-profits tax | 3,187,222.98 |
| (3) For 1918 rates of tax | 3,236,382.53 |
| (b) March 31, 1919 | 2,021,529.55 |
| (c) March 31, 1922 | 2,229,443.93 |
| (d) March 31, 1923 | 1,274,568.85 |
leaving only the sole adjustment on account of the limitation to intangibles, which issue is here in dispute. The agreed consolidated, invested capital for the fiscal periods here in controversy is as follows:
| Period ended | Amount |
| (a) March 31, 1918 - | |
| (1) Under 1917 law | $7,192,403.65 |
| (2) Under 1918 law | 7,134,824.89 |
| (b) March 31, 1919 | 8,944,818.29 |
| (c) March 31, 1922 | 9,849,707.97 |
| The prewar average invested capital is | 2,171,108.60 |
| The prewar average income is | 301,470.16 |
| The foreign tax credits for the said periods are - | |
| March 31, 1918 | 49,159.55 |
| March 31, 1919 | 22,633.01 |
| March 31, 1922 | 4,567.28 |
| March 31, 1923 | 5,329.49 |
It is further stipulated*2963 by and between the parties hereto that the Board may enter an order of redetermination that there is a deficiency in tax due from the petitioner for the fiscal year ended March 31, 1923, in the amount of $3,911.69.
The petitioners withdraw all other contentions and allegations of error in the petitions and leave as the only question for determination by the Board the application of the limitation on account of intangibles, that is, whether the group shall be treated as a unit and the limitation be measured by the par value of the total outstanding stock of the group, $3,236.900, or by the par value only of the outstanding stock of the parent corporation, John Morrell & Co., a Maine corporation, standing alone, $1,666,110.
OPINION.
LITTLETON: The sole issue is whether the limitation on account of intangibles shall be determined upon the basis of the par value of *572 the outstanding capital stock of the consolidated group, after eliminating intercompany holdings, or the par value of the outstanding stock of the Maine corporation which issued stock for the intangibles, is controlled by *2964 , wherein the Board said:
It follows from what we have said that, in applying the limitation on the amount of intangibles, the group shall be treated as a unit, i.e., the limitation shall be measured by the par value of the total outstanding stock of the group. This rule should be followed in both classes of affiliation, and hence in a combination of the two. * * *
The parties have stipulated that "The total outstanding stock of the affiliated group, as a unit, after eliminating all intercompany holdings for 11 years here in controversy, is $3,236,900." It follows, therefore, that the foregoing amount is to be used as a measure for applying the limitation rather than the outstanding capital stock of the Maine corporation of $1,666,110.
Judgment will be entered under Rule 50.