*669 Before GRAUPNER, TRAMMELL, and PHILLIPS.
This is an appeal from the determination of a deficiency in income tax of $123.35 for the calendar year 1921. The taxpayer seeks affiliation with the F. B. Warner Co. and the Davis Warner Arms Corporation, under section 240 of the Revenue Act of 1921, on the theory that substantially all the stock of the corporations involved was owned or controlled by the same interests.
FINDINGS OF FACT.
The taxpayer is a New York corporation, organized in 1909, with its principal office in New York City.
The F. B. Warner Co. and the Davis Warner Arms Corporation were organized in 1909 and 1917, respectively, under the laws of the State of New York.
In 1921 the stock of these three corporations was owned in the amounts and percentages as follows:
| Stockholder. | Kirtland Bros. & Co., Inc. | F. B. Warner Co. | Davis Warner Arms Corporation. | |||
| Shares. | Per cent. | Shares. | Per cent. | Shares. | Per cent. | |
| Franklin B. Warner | 591.4 | 85.9 | 249 | 99.6 | 940 | 64.6 |
| Marvin J. Warner | 96.6 | 14.1 | 1 | .4 | 46 | 3.2 |
| F. B. Warner Co | 302 | 20.8 | ||||
| Kirtland Bros. & Co., Inc | 166 | 11.4 | ||||
| Total | 688 | 100 | 250 | 100 | 1,454 | 100 |
*2593 Franklin B. Warner was the president of each of these companies and Marvin J. Warner was vice president of each of them. Marvin J. Warner is a brother of Franklin B. Warner, and in 1921 was a salaried clerk in the store of the taxpayer. C. C. Warner, who was a son of Franklin B. Warner, and resided at home with his father, was secretary of the F. B. Warner Co. and the davis Warner Arms Corporation.
At stockholders' meetings of the Davis Warner Arms Corporation the stock of that company which was owned by the taxpayer and by the F. B. Warner Co. was voted by Franklin B. Warner. The management of the three companies was personally directed by Franklin B. Warner.
Franklin B. Warner owned the building in which the Arms Corporation operated and charged no rent for its use. He also managed the company without salary. The Arms Corporation paid the cost of operating the power plant connected with the building and used by it in manufacturing, and also paid the taxes.
*670 All of the guns, rifles, and pistols manufactured by the Davis Warner Arms Corporation were sold to the taxpayer at the cost of production. The Arms Corporation made no profit on its sales to the taxpayer.
*2594 The taxpayer sold the Arms Corporation products at a profit.
All three companies occupied the same executive offices, the rent of which was paid by the taxpayer and the F. B. Warner Co. The salaries of the president, and of the bookkeeper and stenographer, who performed services for all three companies in the executive office, were paid by the taxpayer and the F. B. Warner Co.
By letter dated January 20, 1925, the Commissioner held the F. B. Warner Co. and the Davis Warner Arms Corporation to be affiliated.
DECISION.
The taxpayer was affiliated with the F. B. Warner Co. and the Davis Warner Arms Corporation during the year 1921. The deficiency, if any, should be computed accordingly. Final determination will be settled on 15 days' notice, in accordance with Rule 50.