
    Appeal of CONKLIN-ZONNE-HARRISON AGENCY, INC.
    Docket No. 2492.
    Submitted July 1, 1925.
    Decided February 3, 1926.
    Taxpayer was not a personal service corporation during the fiscal year ended April 30, 1921.
    
      J. Robert Sherrod, Esq., for the taxpayer.
    
      J. Arthur Adams-and E. G. LaTce, Esqs., for the Commissioner.
    
      Before Green, Trussell, and MoRRis.
    This is an appeal from the determination of a deficiency of $2,313.06 in income and profits taxes for the fiscal year ended April 30, 1921, arising from the refusal, of the Commissioner to classify the taxpayer as a personal service corporation.'
    FINDINGS OE FACT.
    The taxpayer is a Minnesota corporation, engaged in the insurance agency business.
    For many years prior to 1912 the ConHin-Zonne-Loomis Co., a corporation, was engaged in the management of office buildings, the placing of loans, and the selling of insurance. In September, 1912, this corporation desired to take in one, J. M. Harrison, who had been in the insurance business for 12 years or more, to handle the insurance department. It was later decided to segregate the insurance business, which resulted in the incorporation of the taxpayer, to which was transferred all of Harrison’s insurance business and that of the Conklin-Zonne-Loomis Co., and stock of the par value of $100 was issued therefor as follows:
    Shares.
    J. M. Harrison_I-100
    Conklin-Zonne-Loomis Co-"-200
    In 1918 Harrison received an additional 50 shares of stock, which, ■ together with 35 shares of stock issued to one Sanford prior to that time, resulted in the following stock holdings in the taxpayer during the taxable year in question:
    Shares.
    J. M. Harrison_150
    L. W. Sanford_ 35
    Conklin-Zonne-Loomis Co-150
    Total_ 335
    No cash was paid in for the additional stock issued.
    Harrison and Sanford devoted their entire time to the business. Only one sub-agent was employed, whose activities produced a net income of $25 during the taxable year. A solicitor was also employed in order to give him a chance to pay off his creditors, among whom was the taxpayer. He produced approximately $75,000 worth of business out of $329,806.33. About 15 per cent of the total premium volume was written by outside brokers, who were in the same line of business and transferred insurance to the taxpayer in excess of their writing capacity. Other employees included an office force of 13 or 14, consisting of the usual policy writers, bookkeepers, stenographers, and clerks. The cost of the cashier and switchboard operators was shared with the Conklin-Zonne-Loomis Co. The pay roll of the office for the year ended April 30, 1921, was $20,002.39, in addition to the stockholders’ salaries, amounting to $8,828.12. Uncollected premiums remitted to the insurance companies for two-typical months during the taxable year in question were 9.8 and 13.7 per cent. Its bad debts were nominal. Renewals constituted approximately 75 per cent of the business.
    The balance sheets of the taxpayer as of April 30, 1920 and 1921,. were as follows:
    
      
    
    The accounts receivable included the commissions due the taxpayer, and the accounts payable represented the net amount due the insurance companies at the end of the year. Rotes payable of $310 at the beginning and $10 at the end of the fiscal year represented the unpaid portion of a loan which was made to purchase another insurance agency.
    The stockholders of the Conklin-Zonne-Loomis Co. were as. follows:
    Shares
    A. E. Zonne_124
    G. B. Loomis_• 41
    J. F. Conklin_ 1
    Total_166
    The stockholders A. E. Zonne and G. B. Loomis devoted all their-time to the business of that company. J. F. Conklin, owning one-share, did not take an active part in the business but acted in an advisory capacity. This corporation did not own any buildings or realty, but its main source of income was from commissions received on rentals of office buildings and other properties which were-managed for its customers. In the course of such real-estate business it was instrumental in placing much insurance business with the-taxpayer. Its balance sheets as of April 30, 1920 and 1921, were as follows:
    
      
    
    Its gross income for the fiscal year ended April 30, 1921, was derived from the following sources:
    
      Income. •
    
    Year ended Apr. 30, 1921.
    Commissions on rents collected for principals_$49,467.44
    ■Commissions on sales and loans_ 629.00
    •Commissions on coal sales-,- 1, 651.43
    Interest on bank deposits_ 319. 05
    Interest on investments and notes receivable_ 363. 80
    Interest on Liberty bonds- 1, 017. 32
    Rentals_
    Dividends received from:
    Boston Block Trust Co_ 250.00
    Minneapolis Real Estate Associates- 1, 000.00
    Share of net income earned by the Conklin-Zonne-Harrison Agency- 3, 000.00
    Total_$57, 598.04
    The Commissioner denied the taxpayer personal service classification.
   DECISION.

The determination of the Commissioner is approved. Appeal of Medbury-Wilson Co., 1 B. T. A. 963; Appeal of Hanley-Ried & Co., 2 B. T. A. 315. See also Appeal of W. J. Perry Corporation, 1 B. T. A. 788.  