
    M. B. Austin Co., Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 14883.
    Promulgated October 9, 1928.
    
      M. Manning Marcus, Esq., for the petitioner.
    
      Paul L. Peyton, Esq., and Hugh Brewster, Esq., for the respondent.
   OPINION.

GREen:

The principal question in this proceeding is whether the majority stockholder of the petitioner continued to operate as a partnership after the petitioner was organized. The evidence is uncontradicted that they did. Both Austin and Browne testified that the only purpose of forming the corporation was to take over that part of the business which required the use of capital and that at no time did the corporation acquire the sales agency commission contracts. They further testified that the partnership in question had existed from the year 1898 and was still in existence during 1919. The agreement of copartnership executed on December 1, 1919, corroborates such testimony. The respondent was, therefore, in error in consolidating the net income of the partnership and corporation into one return. The deficiency should be redetermined by excluding from the net income of $91,881.15, determined by the respondent, the amount of $46,896.45.

In view of the foregoing it does not become necessary to consider the two alternatives.

Judgment will be entered under Rule 50.  