
    Phillip C. Donner, Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 22524.
    Promulgated May 28, 1929.
    
      Frederick L. Pearce, Esq., and Edward R. Bwt, C. P. A., for the petitioner.
    
      Bruce A. Low, Esq., for the respondent.
   OPINION.

GREen:

In 1894 the petitioner and his cousin, Ernest Donner, formed a partnership for the manufacture and sale of hatters’ fur. This partnership existed until March 15,1920, when the two individuals conveyed all the assets to a corporation with the same name, and became the sole stockholders in the corporation. The corporation continued in business until December 31,1921, when it was liquidated and the stockholders re-formed a partnership. The business of the corporation and the partnership was, at all times, the same. During the year 1921, the corporation sustained a net loss in the amount of $26,948.86, which the petitioner is seeking to have deducted from the partnership income for the subsequent year.

The pertinent net loss provisions of the Eevenue Act of 1921 are as follows:

Seo. 204. (a) That as used in this section the terra “net loss” means only net losses resulting from the operation of any trade or business regularly carried on by the taxpayer * * *.
(b) If for any taxable year beginning after December 31, 1920, it appears from the production of evidence satisfactory to the Commissioner that any taxpayer has sustained a net loss, the amount thereof shall be deducted from the net income of the taxpayer for the succeeding taxable year; * ⅜ *
(c) The benefit of this section shall be allowed to the members of a partnership * * *.

The loss which the petitioner is here seeking to have deducted in computing the net income of the partnership for the year 1922, is a net loss sustained by a corporation, the assets of which were transferred in liquidation to its stockholders, who thereupon contributed such assets to a partnership composed of the individuals who had previously held the stock of the corporation. Section 2(9) reads as follows:

The term “ taxpayer " includes any person, trust or estate subject to a tax imposed by this Act.
In subparagraph (1) of the same section appears the following definition:
The term “ person ” includes partnerships and corporations, as well as individuals.

It thus appears that by statute the corporation is a separate taxable entity, and it is a matter of common knowledge that the scheme adopted by Congress in levying income and excess-profits taxes contemplates its taxation as such. The corporation, although its stock was owned by the individuals who formed the partnership which took over the business, was a separate and distinct taxable entity. It, and not its stockholders, was the taxpayer. Here, as in Marry J. Gutman, 7 B. T. A. 500, “ We are asked in this proceeding to disregard the corporate entity and hold that the petitioner was in fact a part owner of the business and that the business carried on by the corporation was his business to the extent of his stockholdings.” In that case, we declined to allow a stockholder to reduce his income by his share of the net loss of the corporation, and our ruling here must be the same.

Judgment will be entered for the respondent.  