Rosenwald & Weil, Inc. v. Commissioner

ROSENWALD & WEIL, INC., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Rosenwald & Weil, Inc. v. Commissioner Docket No. 8596. United States Board of Tax Appeals 11 B.T.A. 921; 1928 BTA LEXIS 3688; May 1, 1928, Promulgated *3688 1. The portion of the cost of war facilities acquired by the petitioner which was assumed by the Government should be treated as a return of capital and does not constitute taxable income. 2. Certain contracts held on the facts, to be "Government contract" within the purview of section 301(c) of the Revenue Act of 1918, and the net income attributable thereto is taxable under said section. Benjamin G. Paskus, Esq., C. E. Koss, Esq., and J. C. Peacock, Esq., for the petitioner. J. E. Marshall, Esq., and L. L. Hight, Esq., for the respondent. TRAMMELL *921 This proceeding is for the redetermination of a deficiency in income and profits taxes for the year 1919 in the amount of $121,161.84. The petitioner alleges that the respondent erred in determining (1) the amount of the gross income from war contracts, (2) the amount of expenses allocable to such contracts, (3) in adding to income an amount received from the Government as a part of the cost of certain facilities acquired for war contracts, and (4) in holding that any part of the income in controversy should be taxed under section 301(c) of the Revenue Act of 1918. *922 *3689 FINDINGS OF FACT. The petitioner is an Illinois corporation with its principal office at Chicago. It was ordinarily engaged in the manufacture of clothing, and during the war with Germany it manufactured large quantities of slickers, raincoats, breeches, cotton service coats and water sterilizing bags under several contracts and agreements with the War Department of the United States. Five contracts and agreements were entered into by the between the petitioner and the War Department, as follows: Contracts Nos. 5506-C and 5541-C. - Contract No. 5506-C was dated August 14, 1918, and provided for the manufacture and delivery by the petitioner, upon the terms and conditions specified, of approximately 80,000 cotton service coats. Contract No. 5541-C was dated August 16, 1918, and provided for the manufacture and delivery by the petitioner, upon the terms and conditions specified, of approximately 160,000 pairs wool trousers (new model). Both of these contracts were executed and delivered in quadruplicate, each being signed by C. D. Meyer, Major, Q.M.R.C., United States Army, acting by authority of the Acting Quartermaster General of the Army, and under direction of the Secretary*3690 of War, for and in behalf of the United States, and by "Rosenwald & Weil, By Julius E. Weil, Pres't." These instruments were executed in compliance with statutory requirements, and constituted valid, binding contracts on the part of the United States, as well as of the petitioner. Contract No. 1541 was dated October 24, 1917, and provided for the manufacture and delivery by the petitioner, upon the terms and conditions specified, of approximately 500,000 slickers. This contract, in so far as material here, reads as follows: Q.M. Form No. 108. CONTRACT FOR SUPPLIES TO BE DELIVERED IN BULK AT DEPOTS AND TO PURCHASING QUARTERMASTERS FOR DISTRIBUTION OR USE IN MANUFACTURES, ETC. - 1541 - * * * BETWEEN Col. M. Gray Zalinski, Q.M. Corps, U.S. Army, AND Rosenwald & Weil, FOR Furnishing and delivering slickers, AT Chicago Depot Q.M. Corps, U.S. Army. DATE CONTRACT, October 24, 1917. Contract Expires December 31, 1918. * * * These articles of agreement entered into this 24th day of October nineteen hundred and seventeen, between Colonel M. Gray Zalinski, Quartermaster Corps, United States Army, of the first part, for and in behalf of the United States of America, *3691 and Rosenwald & Weil, (a corporation existing under the laws of the State of Illinois), of Chicago, in the County of Cook and State of Illinois, *923 (hereinafter designated as contractor), of the second part; Witness, That the said parties do hereby mutually covenant and agree to and with each other * * * as follows: * * * In witness whereof, the parties aforesaid have hereunto placed their hands the late first hereinbefore written * * *. M. GRAY ZALINSKI, Colonel, Quartermaster Corps, U.S.A. Witnesses: (Signed) M. E. CAMPBELL as to By (Signed) E. J. GALLAGHER, Jr., Major, Q.M.U.S.R. (Signed) ARTHUR H. COPELL as to (Signed) EUGENE C. KLAUBER as to ROSENWALD & WEIL (Signed) AUGUST GATZEIT as to By (Signed) JULIUS E. WEIL, Secretary. Pres't. Under date of April 25, 1918, the foregoing contract was amended by an instrument designated "SUPPLEMENTAL AGREEMENT FOR MODIFICATION OF CONTRACT" (Q.M. Form No. 109a), whereby it was provided that the contractor should discontinue the manufacture of slickers and in lieu thereof should manufacture new type raincoats, in accordance with specifications and on the terms and conditions stated. Under*3692 date of August 28, 1918, the foregoing original contract was further modified by an instrument designated "SECOND SUPPLEMENTAL AGREEMENT CONTRACT No. 1541," whereby it was provided that the raincoats remaining undelivered on said contract should be made of heavyweight material, in accordance with specifications and on the terms and conditions stated. The first supplemental agreement above mentioned was executed on behalf of the Government as follows: "A. D. Kniskern, Col. Q.M. Corps, By C. D. Meyer, Major, Quartermaster Corps, U.S. Army," and witnessed by J. Silverstein and H. Thorp Kessler. The second supplemental agreement was executed on behalf of the Government by "Geo. F. Mayer, Major, Quartermaster Corps," and witnessed by J. Silverstein and H. Kessler. Each supplemental agreement was executed on behalf of the contractor as follows: "Rosenwald & Weil, By Julius E. Weil, Pres." Under date of February 26, 1918, the following communication was sent from the Office of the Acting Quartermaster General to the Depot Quartermaster at Philadelphia: Subject: Contract - Rosenwald & Weil - 10-24-17 - Slickers. 1. The above-named contract is herewith returned. 2. Attention*3693 is invited to the fact that the reinsurance agreements executed by the Chicago Bonding and Insurance Co. with the U.S. Guaranty Co. and the International Fidelity Insurance Co. in the amount of $66,000 each, together with the amount of $63,256.78, which is the limit of the qualifying power of the Chicago Bonding and Insurance Co., do not aggregate $205,000.00 the *924 original amount of penalty of bond. Another reinsurance agreement should be furnished for the difference, i.e. $9,743.22. 3. Reply hereto by endorsement hereon is requested. By authority of the Acting Quartermaster General. (Signed) ALDEN F. HEAD, 2d. Lt. Q.M.C., N.A. The Depot Quartermaster at Philadelphia replied, under date of April 3, 1918, by first indorsement on said communication as follows: 1. Contract with Rosenwald & Weil dated Cotober 24, 1917, is returned herewith; paragraph 2 complied with. Under date of June 20, 1918, the Depot Quartermaster at Chicago addressed a communication to the petitioner as follows: 1. This Depot is in receipt of a communication from the Office of the Quartermaster General of the Army, Rubber Goods Branch, and for your information with regard thereto*3694 advises you as follows: 2. It will be permissible for contractors to change back to light weight construction coats in place of the heavy weight coats wherever this change will result in keeping up your output. Contract No. 1496-C, executed on Q.M.C. Form 108, provided for the manufacture and delivery by the petitioner, under the terms and conditions stated, of approximately 130,000 overcoats and 130,000 pairs breeches, wool, and, insofar as material here, reads as follows: 1496-C. BETWEEN Colonel H. J. Hirsch, Q.M. Corps. U.S. Army, AND Rosenwald & Weil, FOR Manufacturing and delivering Overcoats and Breeches, AT Chicago Depot, Q.M. Corps, U.S. Army. DATE CONTRACT, March 28th, 1918. Contract Expires August 31, 1918. These articles of agreement entered into this 28th day of March, nineteen hundred and eighteen, between Colonel H. J. Hirsch, Quartermaster Corps, United States Army, of the first part, for and in behalf of the United States of America, and Rosenwald & Weil (a corporation existing under the laws of the State of Illinois), of Chicago, in the County of Cook, and State of Illinois (hereinafter designated as contractor), of the second part, Witness, *3695 That the said parties do hereby mutually covenant and agree to and with each other * * * as follows: * * * In witness whereof, the parties aforesaid have hereunto placed their hands the date first hereinbefore written, * * *. H. J. HIRSCH, Witnesses: Colonel, Quartermaster Corps, U.S.A. (Signed) K. WEISMAN, as to By (Signed) S. W. SHAFFER, Captain, Q.M.R.C. (Signed) M. S. STERN, Sec'y, ROSENWALD & WEIL, as to By (Signed) JULIUS E. WEIL, Pres't. *925 Under date of May 9, 1918, the Acting Quartermaster General sent the following communication to the Depot Quartermaster at Chicago: 1. You are directed to enter into a supplemental agreement with Rosenwald & Weil, your city, on their contract #1496-C, for overcoats and breeches, to provide for an extension of ninety days in delivery. This change is made necessary on account of structural changes they are making in their shops, and the delay has been longer than they anticipated. Advise the Purchasing Branch and the Manufacturing Branch of this office of your action. By direction of the Acting Quartermaster General: Under date of July 22, 1918, the Acting Quartermaster General sent*3696 a letter to the petitioner reading as follows: Subject: Approved Contract #1496-C. 1. Inclosed you will find one number of approved contract with you dated March 28, 1918. 2. Please acknowledge receipt. By authority of the Acting Quartermaster General. Under date of July 24, 1918, the petitioner acknowledged receipt of one number of the approved contract referred to in the foregoing letter. Contract No. 1530-C, executed on Q.M.C. Form No. 108, provided for the manufacture and delivery by the petitioner, on the terms and conditions set out therein, of approximately 10,000 water sterilizing bags, and insofar as material here, reads as follows: #1530-C. BETWEEN Colonel H. J. Hirsch, Q.M.Corps, U.S. Army, AND Rosenwald & Weil, FOR Manufacturing and delivering water sterilizing bags, AT Chicago Depot, Q.M. Corps, U.S. Army. DATE CONTRACT, March 29th, 1918. * * * These articles of agreement entered into this 29th day of March, nineteen hundred and eighteen, between Colonel H. J. Hirsch, Quartermaster Corps, United States Army, of the first part, for and in behalf of the United States of America, and Rosenwald & Weil (a corporation existing under the*3697 laws of the State of Illinois), of Chicago, in the County of Cook, and State of Illinois (hereinafter designated as contractor), of the second part, Witness, That the said parties do hereby mutually covenant and agree to and with each other * * * as follows: * * * In witness whereof, the parties aforesaid have hereunto placed their hands the date first hereinbefore written, * * *. Witnesses: H. J. HIRSCH, Colonel, Quartermaster Corps, U.S.A. (Signed) E. FLETCHER as to By (Signed) H. M. SCHOFIELD, Captain, Q.M.R.C. (Signed) M. S. STERN Sec'y ROSENWALD & WEIL as to By (Signed) JULIUS E. WEIL, Pres't. *926 The foregoing contract was based on, and executed pursuant to, "Award of Contract," dated March 29, 1918, reading in pertinent part as follows: Rosenwald & Weil, Chicago, Illinois. Contract No. 1530-C. Award of Contract. 1. In accordance with your offer, contract is awarded you for manufacturing from material furnished in part by this Corps and delivered at the Chicago, Ill., Depot of this Corps: APPROXIMATELY: 10,000 water sterilizing bags, as per Standard Sample. DELIVERY: 3,000 bags monthly, after thirty (30) days from receipt*3698 of materials by you. * * * 6. Contract will be dated March 29, 1918 and numbered "1530-C." Payments thereunder will be made by the Depot Quartermaster, Chicago, Ill., who will have entire charge of the contract. * * * PURCHASING & CONTRACT BRANCH, By (Signed) H. J. HIRSCH, Colonel, Q.M. Corps, Chief of Branch. OFFICIAL COPY to Depot Quartermaster, Chicago, Ill., for his information, with request that he take entire charge of the contract. As soon as contract papers have been executed, copy of contract will be furnished him. By authority of the Acting Quartermaster General. (Signed) H. M. SCHOFIELD, Captain, Q.M.R.C. The gross amount accrued and received by the petitioner in 1919 in adjustment and discharge or cancellation of its Government contracts was $139,537.75, which included the amount of $22,041.02 and the amount of $3,146.88, or the total amount of $25,187.90, allowed as reimbursement for part of the cost of special facilities acquired by the petitioner for manufacturing the articles to be furnished to the Government in accordance with the contracts. The petitioner is entitled to total deductions of $81,876.43 attributable to said contracts. *3699 The awards in adjustment and discharge of contracts 1541, 1496-C and 1530-C were all made subsequent to January 1, 1919. The award in the case of contract 1496-C was made under the Dent Act as follows: AWARD. FORM 1. (REVISED.) Q.M.C.Q. CLAIM No. PC 428 Clothing & Equipage Division. Seven Zone. THIS FORM TO BE USED WHEN A SINGLE AWARD IS TO BE MADE. AWARD OF SECRETARY OF WAR UNDER THE ACT OF CONGRESS ENTITLED "AN ACT TO PROVIDE RELIEF IN CASES OF CONTRACTS CONNECTED WITH THE PROSECUTION OF THE WAR, AND FOR OTHER PURPOSES." APPROVED MARCH 2, 1919. It appearing to the satisfaction of the Secretary of War that an agreement was entered into in good faith between rosenwald & Weil Corporation of *927 Illinois, the claimant, and H. J. Hirsch, Colonel, Q.M. Corps, (give name, rank or title, and Corps) an officer or agent acting under the authority, direction or instruction of the Secretary of War, on or about the 18th day of March, 1918. during the emergency arising from the declaration of war with the German Empire and prior to November 12, 1918, for a purpose connected with the prosecution of the war; that the agreement has been performed in*3700 whole or in part, or expenditures had been made or obligations incurred by the claimant on the faith of such agreement, prior to November 12, 1918, that the agreement has not been executed in the manner prescribed by law; that the said agreement is within the provisions of the above entitled Act of Congress; that the nature, terms and conditions of said agreement are set out in "Form C", Certificate of CLAIMS BOARD, OFFICE DIRECTOR OF PURCHASE, No. PC 428, dated April 8, 1919, on file in the War Department; that the claimant presented his claim to the Secretary of War before June 30, 1919; that there have heretofore been delivered by the claimant and accepted by the United States under the said agreement 38,930 O. D. Wool Overcoats 130,000 pr. Breeches of the fair aggregate value of $179,663.30; that the said sum of $179,663.30 paid or to be paid for said articles or work heretofore delivered and accepted together with the additional sum of $73,692.89 will adjust, pay, and discharge such agreement upon a fair and equitable basis, and that such sum will not include prospective or possible profits on any part of the agreement beyond the goods and supplies delivered to and accepted by*3701 the United States thereunder and a reasonable remuneration for expenditures and obligations or liabilities necessarily incurred in performing or preparing to perform said agreement. * * * Award Form 1. (Revised.) Claim No. PC 428 The Secretary of War hereby awards to said claimant the sum of $73,692.89, Which sum, in conjunction with the payments herein above mentioned made or to be made for the articles, work or services heretofore delivered and accepted shall be in full adjustment, payment, and discharge of said agreement. The payment by the United States of this award shall operate to vest in the United States title to the property described in "Schedule A" attached hereto. * * * No part of this award is made with respect to any portion of the agreement which was sub-let. RECOMMENDED April 30, 1919. APPROVED, Washington, D.C. 5/16, 1919. Zone No. 7. BOARD OF REVIEW Division . CLAIMS BOARD, OFFICE DIRECTOR OF PURCHASE, By (Signed) L. W. HOLDEN, Captain, Quartermaster Corps, Member. By (Signed) J. M. GRUPPERT, Captain, Q.M. Corps, Member. MADE AND APPROVED BY AUTHORITY OF THE SECRETARY OF WAR: WAR DEPARTMENT CLAIMS BOARD, *3702 By (Signed) A. A. MCKENNY, Member. ACCEPTED: May 3, 1919. Dated 5/17/19. Washington, D.C. ROSENWALD & WEIL, Claimant. By (Signed) M. S. STERN, Secretary. *928 The awards under contracts 1541 and 1496-C were made under the Dent Act, substantially in the same form, subsequent to January 1, 1919. OPINION. TRAMMELL: The parties to this proceeding have stipulated that the gross amount of $139,537.75 was received by the petitioner in 1919 from the cancellation of Government contracts, and that the total amount of allowable deductions attributable to said contracts was $81,876.43, which amounts are set out in our findings of fact. The first two issues are thus settled by stipulation, and this leaves for consideration here only the third and fourth issues, namely, (3) whether the respondent erred in including in taxable income the amount of $25,187.90, which the petitioner received from the Government as reimbursement for a part of the cost of special facilities acquired by it for use in manufacturing the articles to be furnished under the contracts, and (4) whether the respondent erred in holding that the income in controversy is taxable under*3703 section 301(c) of the Revenue Act of 1918, as income attributable to Government war contracts. On the first issue for consideration, it is our opinion that the amount allowed by the Government as reimbursement for a part of the cost of war facilities does not constitute income to the petitioner, but represents that part of the cost of said facilities which was assumed by the Government. This amount represents a return of capital and to that extent reduced the cost of the facilities borne by the petitioner, and to the same extent reduced the basis for the determination of an amortization allowance under section 234(a)(8) of the Revenue Act of 1918. . The respondent contends that the amounts should be considered as income because no claim for amortization was filed as required by the statute. This position is untenable. The amount does not represent an amortization allowance or deduction under the taxing statute, and the time for filing claim for such deduction is not applicable. Accordingly, in computing net income, the gross amount of $139,537.75, received by the petitioner in 1919 from the cancellation*3704 of Government contracts, should be reduced by the amount of $25,187.90. With respect to the second issue for consideration, the respondent contends that the income in controversy is taxable under section 301(c) of the Revenue Act of 1918, which provides in pertinent part as follows: (c) For the taxable year 1919 and each taxable year thereafter there shall be levied, collected, and paid upon the net income of every corporation which derives in such year a net income of more than $10,000 from any Government contract or contracts made between April 6, 1917, and November 11, 1918, both dates inclusive, a tax equal to the sum of the following: *929 (1) Such a portion of a tax computed at the rates specified in subdivision (a) as the part of the net income attributable to such Government contract or contracts bears to the entire net income. In computing such tax the excess-profits credit and the war-profits credit applicable to the taxable year shall be used; * * * The petitioner contends that no part of the income in controversy is taxable under the provision of said section. The petitioner concedes that contracts 5506-C and 5541-C were valid Government contracts made*3705 between April 6, 1917, and November 11, 1918, but asserts that the income derived therefrom during the year 1919, being less than the statutory limitation of $10,000 and being the only income received by it in that year attributable to a Government contract or contracts within the meaning of the statute above quoted, is not taxable thereunder. In reference to the three remaining contracts involved herein, and which are referred to in our findings of fact, supra, namely, contracts 1541, dated October 24, 1917, 1496-C, dated March 28, 1918, and 1530-C, dated March 29, 1918, the petitioner contends that these instruments did not constitute valid contracts on the part of the Government, but were agreements which had not been executed in the manner prescribed by law, and that since the amounts received on account of the adjustment and discharge thereof were awarded under the Dent Act, subsequent to January 1, 1919, the income was attributable to that Act, and not to Government contracts as that term is used in section 301(c), supra. The Act of March 2, 1919, referred to as the Dent Act (40 Stat. 1872), reads, in part material here, as follows: AN ACT To provide relief in cases*3706 of contracts connected with the prosecution of the war, and for other purposes. * * * That the Secretary of War be, and he is hereby, authorized to adjust, pay, or discharge, any agreement, express or implied, upon a fair and equitable basis that has been entered into, in good faith during the present emergency and prior to November twelfth, ninteen hundred and eighteen, by any officer or agent acting under his authority, direction, or instruction, or that of the President, with any person, firm, or corporation for the acquisition of lands, or the use thereof, or for damages resulting from notice by the Government of its intention to acquire or use said lands, or for the production, manufacture, sale, acquisition or control of equipment, materials or supplies, or for services, or for facilities, or other purposes connected with the prosecution of the war, when such agreement has been performed in whole or in part, or expenditures have been made or obligations incurred upon the faith of the same by any such person, firm, or corporation prior to November twelfth, nineteen hundred and eighteen, and such agreement has not been executed in the manner prescribed by law; * * * The three*3707 contracts or agreements last mentioned were suspended or cancelled by the War Department and the petitioner filed applications for relief under the provisions of the Dent Act, supra. The Secretary of War caused said agreements to be investigated by an *930 examining board, which determined that they had not been executed in the manner prescribed by law, and the awards set out in our findings of fact were paid to the petitioner under the provisions of said Act. If the income here involved was in fact received as the result of settlements of valid and binding Government contracts made between the dates specified in the Act, it is immaterial whether or not such settlements were made under the Dent Act. Since the question as to whether said contracts were Government contracts made between April 6, 1917, and November 11, 1918, is presented, we must decide it from the evidence before us. We are not advised by the pleadings, evidence, nor briefs of counsel with respect to any alleged defect which would impair the validity of these contracts. On this point, the petitioner was content merely to offer in evidence certified copies of the original instruments on file in the*3708 War Department, together with certified copies of certain related documents and correspondence. It is to these we must look in determining the issues presented. The three contracts in controversy were executed on behalf of the Government by officers of the Quartermaster Corps, which is a component part of the War Department. The manner of making such contracts is prescribed by paragraph 3744 of the Revised Statutes, which provides that "it shall be the duty of the Secretary of War, of the Secretary of the Navy, and of the Secretary of the Interior to cause and require every contract made by them severally on behalf of the Government, or by their officers under them appointed to make such contracts, to be reduced to writing, and signed by the contracting parties with their names at the end thereof." Insofar as this statute relates to contracts made with the Quartermaster Corps, it was modified by the Act of March 4, 1915, 38 Stat. 1062-1078, which provides: That hereafter whenever contracts which are not to be performed within sixty days are made on behalf of the Government by the Quartermaster General, or by officers of the Quartermaster Corps authorized to make them, and are*3709 in excess of $500 in amount, such contracts shall be reduced to writing and signed by the contracting parties. In all other cases contracts shall be entered into under such regulations as may be prescribed by the Quartermaster General. Each of the three contracts above referred to was in excess of $500 in amount, and was not to be performed within 60 days. Each was reduced to writing and signed by the contracting parties, and each was executed on behalf of the Government by an officer of the Quartermaster Corps. These facts lead us to the conclusion that the instruments constituted valid contracts, executed in the manner prescribed by law, if the respective officers of the Quartermaster Corps by whom they *931 were executed on behalf of the Government were authorized to make them. We can have no doubt that the Quartermaster General had authority to make such contracts, subject to the limitations imposed by the Act of March 4, 1915, supra, and that he had authority to authorize subordinate officers of the Quartermaster Corps to make them. That the officers who made these contracts possessed the requisite authority, we think, is clearly indicated by the record. *3710 In the case of each of said contracts, the name of the contracting officer was signed by a subordinate officer, but it appears from subsequent correspondence or from modifying contracts, or both, that the contracting officers recognized their signatures as properly signed and regarded the instruments as binding contracts. And the same recognition and approval were extended by the Acting Quartermaster General. The record further discloses that the officers who executed these contracts on behalf of the Government acted under authority of the Secretary of War. A somewhat similar situation was presented in , where the court, in its opinion at page 144, said: Some suggestion is made that the signature of General Kniskern to the letter of December 10 was by another. The signature was "By authority of the Director of Purchase and Storage: "A. D. KNISKERN, "Brigadier General, Q. M. Corps, Officer in Charge, "By O. W. MENGE, "2d Lieut., Q. M. Corps." It is evident from subsequent correspondence that General Kniskern recognized this as his signature and as a binding contract. There seems no doubt about*3711 the authority of Lieut. Menge to attach his signature or that it was the regular practice in the office. In a similar case the Court of Claims, , held that the affixing of the signature of a contracting officer by another duly authorized created no infirmity in the execution of the contract. A similar conclusion was reached by Attorney General Gregory, 31 A.G. 349, and by Attorney General Wirt, 1 A.G. 670. From an examination of all the evidence before us, we can reach no other conclusion than that the contracts involved herein were valid contracts, executed in the manner prescribed by law. The fact that the Secretary of War settled the contracts under the Dent Act then is not material. That fact is not determinative of the validity or invalidity of the contracts, and we have found from all the evidence that they were valid. Since we find that the three contracts which were adjusted and settled by Dent Act awards were valid Government contracts executed between April 6, 1917, and November 11, 1918, and it being *932 conceded that the other two contracts were valid Government contracts made*3712 between those dates, it is our opinion that the amounts received in settlement of the five contracts are taxable under section 301 of the Revenue Act of 1918. . See also . We see no reason for changing our view that the original contracts alone were the cause of the petitioner's receipt of the income. If there had been no original contracts, no compensation would have been paid for their cancellation, settlement or adjustment. In view of what has been said above, the deficiency herein should be redetermined upon the basis of a net income of $32,473.42, taxable under the provisions of section 301(c) of the Revenue Act of 1918. Reviewed by the Board. Judgment will be entered on 15 days' notice, under Rule 50.