*122OPINION.
Lansdon :The Midwest Hotel Co., previously operated either as a partnership or individual business, was incorporated on September 17, 1917, and, so far as the record of this proceeding shows, an interest in excess of 50 per cent remained in the hands of prior owners. Its statutory invested capital at the date of incorporation, as limited by section 331 of the Revenue Act of 1918, therefore, was $12,000, which the parties agree was the cost to the prior owners of all the assets acquired for stock of the par value of $30,000.
Prior to August 12, 1918, a sublease on the property used by the petitioner was acquired by Staats at a cost of $23,000. Such leasehold was paid in to the corporation by Staats on August 12, 1918, and, from that date, was an element of its invested capital.
It is contended by the Commissioner that, inasmuch as the sublease was never actually made to Staats, although it was proved that he paid $23,000 therefor, it was acquired by the corporation without cost and therefore can not be taken into invested capital at its cost to Staats or at,any other figure. We are not impressed by this argument. Staats bought and paid for the lease prior to August 12, 1918. That the instrument evidencing such purchase and ownership had not been executed, we regard as immaterial and as affecting the form rather than the substance of the transaction.
From the evidence and the law, we conclude that the statutory invested capital of the petitioner at August 12, 1918, included hotel equipment originally paid in for stock at a value of $12,000, and the leasehold on the real property acquired by Staats at a cost of $23,000, and by him paid in to the petitioner. We also find that the petitioner is entitled to recover the cost of such leasehold during the period from August 12,1918, to August 26,1926, by annually deducting aliquot parts of such cost from its annual gross income. Appeal of Steinbach Co., 3 B. T. A. 348.
Judgment will be entered on 15 days’ notice, v/nder Bule 50.