
    Appeal of OAKLAND-CALIFORNIA TOWEL CO.
    Docket No. 1597.
    Submitted July 3, 1925.
    Decided September 28, 1925.
    
      Chris B. Fox, Esq., for the taxpayer.
    
      John D. Foley, Esq., for the Commissioner.
    Before GRaitpNer, Teammell, and Phillips.
   This appeal is from the determination of a deficiency in income and profits taxes in the amount of $1,188.18 for 1919 and 1920. It is based upon the action of the Commissioner in disallowing the value of good will acquired for stock claimed by the taxpayer in its invested capital for those years.

FINDINGS OF FACT.

1. The taxpayer is a California corporation, having its principal place of business at Oakland. It was organized in 1907 for the purpose of taking over the business of two existing corporations, to wit, the Oakland Towel Co. and the California Towel Co. It acquired the assets and good will of these two companies for 49,996 shares of its capital stock of the par value of $1 per share. Both of the former corporations were going concerns at the time of the transfer. They were engaged in the business of supplying towels to offices, barber shops, hair-dressing parlors, and places of that kind and had a regular clientele.

2. The books of the two businesses taken over have been destroyed and there was no evidence as to what their respective earnings were, nor was there any evidence as to the net tangible assets used in the former businesses.

3. In March, 1908, an employee subscribed for 600 shares of stock and agreed to pay $1.50 per share and to have a certain part of his wages retained by the company over a long period of time, to wit, from March, 1908, until May, 1910, to pay for such stock.

DECISION.

The determination of the Commissioner is approved.

Aeundell not participating.  