
    Appeal of INDUSTRIAL COMPANY OF BINGHAMTON.
    Docket No. 2939.
    Submitted June 25, 1925.
    Decided July 14, 1925.
    
      Henry Herrick Bond, Esq., for the taxpayer.
    
      P. S. Crewe, Esq., for the Commissioner.
    Before James and Littleton.
   This is an appeal from a determination of a deficiency in income and profits tax for the calendar year 1919, in the amount of $696.57, arising from the refusal of the Commissioner to permit taxpayer to file a consolidated return with Dunn & McCarthy for the calendar year 1919.

FINDINGS OF FACT.

Taxpayer is a New York corporation, organized in 1906 by the Chamber of Commerce of Binghamton, N. Y., for the purpose of acquiring land in that city and erecting thereon a factory for lease to Dunn & McCarthy, manufacturers of shoes.

In September, 1906, Dunn & McCarthy, a corporation, with offices and place of business in the City of Auburn, N. Y., entered into an agreement with the Binghamton Chamber of Commerce to the effect that the Binghamton Chamber of Commerce would organize a corporation for the purpose of acquiring a site and erecting thereon buildings; that upon completion of the buildings Dunn & McCarthy would lease the land and buildings for a period of 10 years to carry on the business of manufacturing footwear, and would pay to such corporation an annual rental equal to 6 per cent of the cost of the land and buildings, together with all taxes, repairs, and insurance.

Pursuant to this agreement the Binghamton Chamber of Commerce organized the Industrial Company of Binghamton, and, on November 7, 1906, it entered into a contract with the Binghamton Chamber of Commerce for carrying out the contract with Dunn & McCarthy.

The original authorized capital stock of the taxpayer was $80,000. It began business with $30,000 paid in.

Pursuant to the terms of the contract between the Binghamton Chamber of Commerce and Dunn & McCarthy, taxpayer completed the factory and leased the land and buildings to Dunn & McCarthy on J.uly 1, 1907, for a period of 10 years, at an annual rental of 6 per cent of their cost. This lease was renewed on July 7, 1917, for a further period of 10 years.

From time to time taxpayer sold additional stock for the purpose of making additions to the buildings, and during the year 1919 had outstanding 1,750 shares with a par value of $100 each. Dunn & McCarthy owned 1,294 shares of this number and the remaining 456 shares were owned by approximately ninety business men of Binghamton who had no direct connection with Dunn & McCarthy. Subsequently, in 1922, Dunn & McCarthy purchased the entire holdings of the minority stockholders. The minority stockholders voted their stock in accordance with the desires of Dunn & McCarthy for the reason that the desires of that company coincided with the desires of the minority stockholders. During the year 1919 the vice president of Dunn & McCarthy was one of the directors of the taxpayer and that board took such action in respect to the leased premises as Dunn & McCarthy requested.

DECISION.

The determination of the Commissioner is approved.  