
    Appeal of ROTHENBERG & CO.
    Docket No. 220.
    Submitted March 17, 1925;
    decided May 21, 1925.
    
      Herman Goldman, Esq., for the taxpayer.
    
      A. H. Fast, Esq., for the Commissioner.
    Before Ivins, Koenee, Maeqtjette, and Mobeis.
    This appeal is from a determination by the Commissioner of a deficiency in income and profits taxes for the fiscal years ended January 31, 1917, to January 31, 1922, inclusive, in the amount of $9,451.69. The deficiency arose from the disallowance by the Commissioner of $100,000 of the invested capital claimed by the taxpayer for each of the years involved. The appeal was submitted on the pleadings and oral and documentary evidence from which the Board makes the following
    FINDINGS OF FACT.
    The taxpayer is a corporation organized under the laws of the State of New York in the year 1906 to take over the business of Rothenberg & Company, a partnership, which owned and conducted a large department store in New York City. Upon the organization of the corporation, Leo A. Price, who had been general manager and the owner of a controlling interest in the partnership, became the president of the corporation and the owner of a majority of the shares of its capital stock. The corporation has been dormant since December, 1923.
    In March, 1913, Rothenberg & Co. entered into a written contract with the “ 14th Street Store,” a corporation also conducting a department store in New York City, whereby Rothenberg & Co. agreed to sell to the 14th Street Store its entire business, including its trade name and good will, and its fixtures, merchandise, stables, horses, etc., and the 14th Street Store agreed to pay to Rothenberg & Co. $50,000 for the good will and the exclusive right to the use of the trade name or names; book value for the fixtures, horses, wagons, harness, and stable equipment, estimated at $80,000, and net invoice cost for all merchandise; to assume and carry out all the outstanding orders for merchandise, and to take an assignment of three certain leases enumerated in the contract, or, if the lessor should object, to accept subleases from Rothenberg & Co.
    The contract further provided that the 14th Street Store would employ Leo A. Price as its general manager and pay him at the rate of $3,000 per month from the date of the transfer of the assets of Rothenberg & Co. to August 1, 1913, and $66,000 per year from August 1,1913, to August 1, 1918, and annually, in addition thereto, an amount equal to one-fourth of the net profits of the business of the 14th Street Store.
    The transfer of the assets of Rothenberg & Co. to the 14th Street Store was made about June, 1913, and the 14th Street Store at that time paid to Rothenberg & Co. in cash $50,000 for its good will and the use of its trade name, and also paid for the other assets according to the terms of the contract entered into in March, 1913. Rothen-berg & Co. then liquidated its assets, but the corporation was not dissolved. Price, in June, 1913, entered into the employ of the 14th Street Store, under the terms hereinabove set forth.
    In December, 1913, the 14th Street Store failed and went into bankruptcy. The creditors received about 20 per cent of their claims. By oral agreement between him and the receiver, Price accepted, in full settlement of all of the 14th Street Store’s indebtedness and liabilities to him, the trade name and good will of Rothen-berg & Co. In March, 1914, he turned over to the dormant corporation, Rothenberg & Co., the trade name and good will, and, in consideration of such good will and trade name and services to be performed by him in connection with reorganization, reviving and taking general charge of the business of the corporation, there was issued to him $100,000 of the corporation’s common stock. After the reorganization his salary was fixed at $15,000 per year.
    The Commissioner disallowed for the purpose of invested capital the $100,000 of stock issued to Price for the good will and trade name, and determined that there is a deficiency in tax for the years ended January 31, 1917, to January 31, 1922, in the amount of $9,-451.69. The taxpayer was notified of the Commissioner’s determination by registered letter mailed July 22, 1924. The petition herein was filed September 20, 1924.
   DECISION.

The determination of the Commissioner is approved. No satisfactory evidence was introduced establishing any actual cash value for the good will or the services to be performed by Price in excess of the salary allowed him, as required by section 326 of the Revenue Acts of 1918 and 1921.  