
    Interborough News Co., Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 8170.
    Promulgated February 28, 1927.
    
      G. A. Sehultheis, for the petitioner.
    
      G. E. Curl, Esq., for the respondent.
    This proceeding is for the redetermination of a deficiency in income and profits taxes for the calendar years 1920 and 1921 of $2,076.88. The petitioner alleges error on the part of the Commissioner in deducting an operating deficit of a subsidiary corporation from the earned surplus of the parent company in the computation of invested capital used as a basis for determining the amount of taxes for the years in question.
    FINDINGS OF FACT.
    The petitioner is a New York corporation with its principal office in New York City. It owned and controlled all the capital stock of the Interborough Transfer Co., with which it filed consolidated returns for the calendar years 1920 and 1921. In both of those years there was on the books of the Interborough Transfer Co. an impairment of capital which was the result of previous years’ operating deficits of the business of that company, which at December 31, 1919, amounted to $35,369.69, and at December 31, 1920, amounted to $37,744.80. The capital stock of the petitioner was $150,000 and that of its subsidiary was $100,000. The consolidated capital stock of the two corporations was $150,000. An item of good will of $120,718.31, included in the petitioner’s assets, is subject to a limitation of 25'per cent of the capital stock issued, that is $37,500, and the invested capital as shown by the books is therefore subject to a reduction of the difference between $120,718.31 and $37,500, or $83,218.31.
   OPINION.

MoRRis:

No testimony was introduced at the hearing and the above findings of fact consist of the allegations of fact set forth in the petition which were admitted in the answer. We have previously held that, in determining the consolidated invested capital of an affiliated group, the operating deficits of any member shall be offset against the earned surplus of the others. Appeal of Gould Coupler Co., 5 B. T. A. 499; Appeal of W. S. Bogle & Co., 5 B. T. A. 541. Those decisions are controlling of the question herein raised.

Judgment will Toe entered for the respondent.  