"Whereas this corporation has agreed with Straus Brothers and Company, a co-partnership, to purchase, acquire and take over the assets and property of said Co-partnership for the price and upon the terms set forth in the draft of the contract between this corporation and said Co-partnership, which has just been submitted.

"Therefore, Be it resolved that this corporation do acquire, purchase and take over the assets and property of said Straus Brothers and Company (except only the stock in this corporation owned by said Co-partnership) for the price and upon the terms set forth in the draft of the contract hereinbefore referred to and that the said draft of said contract be ap proved and that the directors and officers of this corporation be directed and authorized and empowered to purchase all the assets and property of said Straus Brothers and Company (except and save only the stock in this corporation owned by said Straus Brothers and Company) for the price and upon the terms set forth in said draft of said contract and that said directors and officers be authorized and empowered to execute said contract with said co-partnership."

This resolution was adopted.

NOW, THEREFORE, that the draft of said contract set out in the minutes of the Stockholders' Meeting held on this day be approved and that this corporation do purchase and acquire all of the assets and property of that co-partnership (save and except only the stock in this corporation owned by said co-partnership) for the price and upon the terms set out in said contract and that upon the transfer of said assets and property to this corporation, this corporation do release, discharge and forever acquit said co-partnership and each and every member thereof from any and all liability upon the indebtedness now owing this corporation from said co-partnership.

"BE IT FURTHER RESOLVED that the President and Secretary of this corporation be and they are hereby authorized, empowered and directed to execute said contract with said copartnership in the name of and for and on behalf of this corporation."

The assets referred to in said minutes and which were transferred by the partnership to the corporation in pursuance of the contract ratified by said minutes as well as the other assets transferred by the partnership to the corporation in 1924, were recorded on the partnership and corporation records as follows:

The records show that assets having a book value of $397,350.22 were transferred to the corporation during 1924. Of this amount, $10,215.00 represented assets transferred at cost with no profit to the partnership, the remaining $387,135.22 represented assets which cost $236,310.42. The $397,350.22 of assets were transferred at different times. First in February, 1924 the La Valencia Apartments were transferred at $72,584.72 which amount was credited to the partnership on the corporation books. Another amount represented $1,050.00 of E. G. Shiner Co. was transferred at various times and likewise credited to the partnership account. The balance of $323.715.50 representing a group of stocks, was transferred on the partnership books on Dec. 31, 1924. Immediately before this last transfer, the partnership owed the corporation $195,768.16. Upon the transfer of these assets the amount of $323,715.50 at which these assets were transferred, was credited to the partnership book account showing

said indebtedness to the corporation at $195,768.16, thereby changing this credit balance to a debit balance of $127,947.34 on the books of the partnership.

Both the partnership and the petitioner for 1924 and 1925, as well as for prior years, kept their books on the accrual basis. The corporation and the partnership maintained separate sets of books. The balance sheet of the corporation

at December 31, 1924, shows outstanding common stock of $1,029,000 and preferred stock of $617,500.00 and a surplus of $2,844,833.20. The balance sheet at December 31, 1923 showed the same common stock outstanding, $418,000 of preferred stock and a surplus of $3,043,958.82.

The Commissioner of Internal Revenue has determined that said partnership received the sum of $387,135.22 for the assets transferred to the corporation and referred to in the minutes of stockholders and directors meetings hereto attached. The Commissioner of Internal Revenue has determined that said partnership realized a profit of $150,824.80 on the transfer of said assets and that $50,274.93 thereof is profit and taxable income to petitioner for 1924.

On June 8, 1928 said partnership Straus Brothers and Company through one of its partners, the petitioner requested the Commissioner of Internal Revenue to consolidate the accounts of the partnership and said corporation The Straus Brothers Company, for 1924 and 1925. Said request stated:

"that, in order to avoid an undue hardship the Commissioner of Internal Revenue is hereby requested to consolidate the accounts of the related businesses of Straus Brothers and Company (co-partnership) and The Straus Brothers Company, corporation, for the purpose of computing the tax liability thereof.

"That, this application is made under the provisions of Section 240 (d) of the Revenue Act of 1924."

During the year 1925 the partnership Straus Brothers and Company sold stock of The Straus Brothers Company to Jay Rich at a price $1,370.00 in excess of cost to it. The Commissioner of Internal Revenue has included onethird of said $1,370.00 in petitioner's taxable net income for the year 1925.

The following facts were established by evidence in addition to the stipulation.

No charge was made during 1924 and 1925 by the corporation to the partnership for the services of any department of the corporation, either accounting or legal, and no charge was made for rental or office space, or for light, heat, salaries or legal fees. The corporation did the work of the partnership during 1924 and 1925 and no charge was made to the partnership.

On November 24, 1919, the partnership purchased 700 shares of the common stock of the corporation from one Frank R. Smith for $212,205.

At least one reason for the transfer of assets by the partnership to the corporation in 1924 was because the corporation was in need of additional assets. Prior to said transfer the partnership was indebted to the corporation and the banks were insisting that the indebtedness be liquidated or cleared up, and there was no way by which the partnership could pay except by a transfer of assets. The stocks were transferred to the corporation at the values at which they

were then carried on the books of the partnership. No effort was made to ascertain the actual market value of the assets at the time of transfer to the corporation. Prior to 1923 and 1924 the stocks owned by the partnership which had a "street" market were written up or down on the books according to the market value, and other stocks were written up to reflect actual values based on the best judgment of the partners, but not in every instance written down, when values fell, to reflect accurately actual values.

On April 30, 1926, the corporation was indebted to the partnership in the sum of $172,443.48, and on April 30, 1927, that amount was reduced to $72,076.36 by adjusting debits and credits, including the transfer of the Abe Ackerman withdrawal account in the amount of $108,608.58. This balance of $72,076.36 was credited to the capital investment of the partnership, and the partners in turn donated it to the surplus of the corporation.

On April 30, 1927, the petitioner donated to the surplus of the corporation the total amount of $160,192.16, which included $108,608.58 representing the petitioner's special withdrawal account. This withdrawal account, representing the sum owing by the partnership to the petitioner, was transferred to the books of the corporation and appeared as a credit to the corporation on December 31, 1924. It was part of the entries reflecting the transfer of assets to the corporation by the partnership on the last mentioned date. On April 30, 1926, the entry was canceled and the item transferred back to the books of the partnership and remained there until April 30, 1927, when it was again transferred to the corporation and the amount donated by the petitioner to the surplus of the corporation.

OPINION.

TRAMMELL: The petitioner contends, first, that in determining the deficiencies for both taxable years here involved, the respondent erred in refusing to grant the petitioner's request for a consolidation of the accounts of the partnership and of the corporation pursuant to the provisions of section 240 (d) and 240 (f) of the Revenue Acts of 1924 and 1926. These statutes are identical in form, and read as follows:

In any case of two or more related trades or businesses (whether unincorporated or incorporated and whether organized in the United States or not) owned or controlled directly or indirectly by the same interests, the Commissioner may and at the request of the taxpayer shall, if necessary in order to make an accurate distribution or apportionment of gains, profits, income, deductions, or capital between or among such related trades or businesses, consolidate the accounts of such related trades or businesses.

The petitioner urges that if the accounts of the two businesses in question were consolidated for the taxable years, the transfer of assets from the partnership to the corporation in 1924 would be eliminated as an intercompany transaction, resulting in no taxable gain to the partnership and no deficiency on that account in petitioner's tax for that year; and that likewise there would be no deficiency in petitioner's tax for 1925 if the accounts were consolidated, because, it is argued, in such event the gain determined by the respondent as derived by the partnership from the sale of the corporation's stock would be eliminated as a nontaxable capital transaction.

Without deciding the correctness of the petitioner's arguments respecting the results which would flow from a consolidation of accounts, it is sufficient to point out that he has failed in the matter. of proof on two essential points to bring his case within the statutes relied upon. The evidence adduced by the petitioner shows only that the corporation furnished office space rent-free to the petitioner, and also supplied heat, light, clerical, legal and other services to the partnership without charge, but no attempt was made to show the reasonable value of such services rendered in the taxable yearswhether merely of nominal or material amount--and no proof offered to show the necessity otherwise for consolidation of the accounts "in order to make an accurate distribution or apportionment" of the income and expenses of the alleged related businesses.

No reason is assigned or proof offered to show that any portion of the taxable income determined by the respondent should be distributed or apportioned to the corporation, and, since the evidence before us relating to expenses affords no basis for a distribution or apportionment of those items, the respondent's action in refusing the petitioner's request for a consolidation of the accounts will not be disturbed. Roessler & Hasslacher Chemical Co., 25 B. T. A. 915; Western Hide & Fur Co., 26 B. T. A. 354. This being the only error alleged in respect to the year 1925, the deficiency determined by the respondent for that year is approved.

It is not necessary for us to decide whether, if the accounts were consolidated, it would result in the elimination of taxable gain as distinguished from "an accurate distribution or apportionment of gains, profits, income, deductions, or capital between or among such related trades or businesses."

The transaction whereby the assets of the partnership were transferred to the corporation took the form of a sale of assets to the corporation. The minutes of the stockholders' meeting and the minutes of the directors' meeting referred to the sale of assets by the partnership and the purchase of assets by the corporation. The

stipulation of facts states that the assets referred to in the minutes which were transferred by the partnership to the corporation in pursuance of a contract ratified in the minutes were transferred in pursuance of the contract.

The contention of the petitioner is that the form of the transaction should be disregarded and that the substance should be considered in determining the tax liability. The respondent contends that the terms of the written instrument, that is, the contract of sale, should not be disregarded and that the parties should be bound by their written instrument. Considering, for the sake of argument, that oral testimony might be considered to show what the actual transaction was, even to the extent of varying the terms of the written contract, see J. W. Solof, 1 B. T. A. 776, Rubay Co., 9 B. T. A. 133, James J. O'Toole, 12 B. T. A. 769, Stockyards Bank of Cincinnati, 25 B. T. A. 964, the facts in this case, based on oral testimony, do not indicate that the transaction was other than what it purported to be, that is, a sale by the partnership. The actions of the parties, on the other hand, affirmatively indicate that all parties to the transaction considered it a sale.

To the extent of $195,768.16, the purchase price was offset by indebtedness due by the partnership to the corporation and the balance of $127,947.34 was set up on the books of the corporation as an indebtedness to the partnership and was set up on the books of the partnership as an account receivable due from the corporation. After 1924 there were various debits and credits on the books of the corporation and the partnership. At one time, at the end of 1924, the indebtedness due from the corporation to the partnership was $57,162.95. This indebtedness was later increased and decreased in various amounts. On April 30, 1926, the corporation was indebted to the partnership in the sum of $172,443.48. On May 1, 1927, the amount of the corporation indebtedness to the partnership at that time being $72,076.36, the petitioner received credit for one-third of that amount and at that time the amounts credited to the partners were donated by them to the surplus of the corporation.

Interest was allowed on the credit balance due by the corpora tion to the partnership.

From the foregoing facts, it may well be that the corporation actually paid the amount of $127,947.34 which was credited to the partnership by the corporation when the assets were transferred to the corporation at the end of 1924. In any event, the subsequent transactions indicate a recognition by both the corporation and the partnership of indebtedness for the assets acquired by the corporation. The partnership, which was on the accrual basis, treated the indebtedness as a valid account receivable. If the excess value of