
    Edward C. Striffler, Inc., Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 5533.
    Promulgated July 30, 1927.
    Under the facts herein the petitioner is entitled to include in its invested capital for the year 1920 the value of the good will acquired from its predecessor.
    
      ‘William D. Harris, Esq., for the petitioner.
    
      J. Harry Byrne, Esq., for the respondent.
    This proceeding is for the redetermination of a deficiency in income and profits tax for the year 1920 in the amount of $1,707.66. The only question for decision is whether the petitioner is entitled to include in invested capital for 1920, good will of the value of $10,000 acquired from a predecessor business.
    
      FINDINGS OF FACT.
    The petitioner is a New York corporation organized in the year 1918 for the purpose of acquiring an iron and steel hardware business owned and operated by Edward C. Striffler. Its principal office and place of business are at New York City.
    In or about the year 1870, the father of Edward C. Striffler founded an iron and steel hardware business in New York City. About January, 1897, Edward'C. Striffler and Emil Budolph purchased the business of Edward C. Striffler’s father, paying about $40,000 for the tangible assets and $10,000 for the good will thereof. In the year 1907, Edward C. Striffler purchased from Emil Budolph his one-half interest in the business for $66,525.84, of which $5,000 was paid specifically for Budolph’s interest in the good will. On January 1, 1919, Edward C. Striffler conveyed all of the assets of the business, including good will, to the petitioner in consideration of the issuance to him by the petitioner of its capital stock, consisting of 1,250 shares of the par value of $100 each. The good will of the business at the time it was transferred to the petitioner was of the cash value of $10,000. The par value of the stock issued by the petitioner for the business of Eward C. Striffler exceeded the value of the tangible assets conveyed by more .than $10,000.
    The respondent refused to permit the petitioner to include in invested capital for the year 1920 any amount of the good will acquired from Edward C. Striffler as hereinabove set forth.
   OPINION.

Maequette :

Edward C. Striffler acquired for $10,000 the good will of the business founded and operated by his father, and he was entitled to include in the invested capital of his business on account of said good will the amount of $10,000. When he sold his business to the petitioner in 1919 the value of the good will in question was still $10,000. He received therefor stock of the par value of more than $10,000. The lowest of the three limitations on the inclusion in invested capital of intangible assets acquired for stock is in this case the value of the intangibles, to wit, $10,000, and the petitioner is not prevented from including that amount in its invested capital by section 331 of the Bevenue Act of 1918, since it is not in excess of the amount at which Striffler was entitled to include it in the invested capital of his business.

Judgment will be entered on 15 days’ notice, under Rule 50.

Considered by Phillips, Yan Fossan, and Milliicen.  