
    Appeal of ULLMAN MANUFACTURING CO.
    Docket No. 3654.
    Submitted October 9, 1925.
    Decided November 11, 1925.
    
      Joseph J. Klein, G. P. A., for the taxpayer.
    
      P. S. Crewe, Esq., for the Commissioner.
    Before J ames, Littleton, Smith, and Tetjssell.
   This is an appeal from the determination of a deficiency in income and profits tax in the amount of $5,804.51 for the calendar year 1919, arising from the refusal of the Commissioner to permit the taxpayer and the Fishel, Adler & Schwartz Co., Inc., to file a consolidated return.

BINDINGS OF PACT.

Taxpayer is a West Virginia corporation, .engaged in the sale of pictures, with principal office in the City of New York Prior to 1900 there existed a partnership known as the Fishel, Adler & Schwartz Co. engaged in the same business as the taxpayer. Four of the five partners died prior to 1900, the business being subsequently carried on by A. A. Fishel, the surviving partner, until December, 1910, when he was adjudged a bankrupt. In December, 1910, the taxpayer purchased the business of Fishel, Adler & Schwartz Co. from the trustee in bankruptcy for $85,000, and in January, 1911, it was incorporated, $35,000 par value of preferred stock being issued for the stock of merchandise, copyrights, and prints, and $35,000 par value of common stock for good will. The business of the two companies was thereafter carried on in the same building, managed by the same officers, a considerable portion of the expense of Fishel, Adler & Schwartz Co. being borne by the taxpayer.

Upon incorporation of Fishel, Adler & Schwartz Co., A. A. Fishel, former owner of the business, who was well known to the officers of taxpayer, was employed by Fishel, Adler & Schwartz Co., Inc., as a salesman at a salary of $50 per week, and was given 20 per cent, or 70 shares, of the common stock of that company. He was also made a director of the company. The stock was given to Fishel at the time of his employment in lieu of larger compensation, in order to encourage him to make the company a success, and with the understanding that, if he should be discharged or should resign his position, he would sell the stock to the taxpayer at a reasonable price. Due to certain financial difficulties in which Fishel was involved at the time of his employment, the 10 shares of stock of Fishel, Adler & Schwartz Co., Inc., which he was to receive were issued to the Ullman Manufacturing Co. on July 31, 1911, to be held for him. On February 4, 1913, this certificate was canceled and a new certificate for 10 shares was issued to Caroline Fishel, wife of A. A. Fishel, who held the same until December 12, 1921, when the stock was purchased from her by the taxpayer for $300. A. A. Fishel resigned his position January 31, 1919, at which time nothing was said concerning the 10 shares of stock held by Caroline Fishel.

decision.

The determination of the Commissioner is approved.  