
    Infant Incubator Co., Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 11609.
    Promulgated June 7, 1928.
    
      J. J. Driscoll, G. P. A., for the petitioner.
    
      J. A. Adams, Esq., for the respondent.
   OPINION.

Trammell:

The only question in this case is whether the petitioner is a personal service corporation as defined by the Revenue Act of 1918. One of the necessary requirements in order to entitle it to that classification is clearly met, that is, all of the stockholders Acre regularly engaged in the active conduct of the business of the corporation. There are other requirements, however, which must be met in order to entitle the petitioner to such classification. The fact that all of the stockholders were regularly engaged in the active conduct of the business does not mean that the income of the corporation is to be ascribed primarily to the activities of the principal owners or stockholders. We think from a consideration of all the evidence that it can not fairly be said that the income is to be ascribed primarily to the activities o.f the stockholders. In reaching this conclusion we have considered the capital invested in its business, the value of the assets owned which were used in the production of income, the large number of skilled employees without whose services the corporation could not have operated its business. We think that these facts were factors which contributed very largely to the production of the income of the petitioner; in fact, to such a great extent that it could not be said that the income was primarily ascribable to the activities of the stockholders.

The corporation received its income from the public as admission charges to the public exhibitions of the operation of the infant incubators which were explained by lecturers or instructors, and while we do not discount the important public spirited service rendered by the petitioner corporation, it seems to us that this service was not the principal income-producing factor in the business. On the other hand, we are impressed with the fact that capital was a material income-producing factor and that the corporation does not meet the requirements of the statute to entitle it to classification as a personal service corporation.

Judgment will be entered under Bule 50.  