Appeal of R. A. Tuttle Co.

[1219] OPINION. Ivins: The Commissioner’s answer contains a plea in bar to the Board’s jurisdiction as to the year 1919. This contention is overruled on authority of the Board’s decision in the Appeal of E. J. Barry, 1 B. T. A. 156; and Appeal of Hickory Spinning Co., 1 B. T. A. 409. Turning now to the merits, we find that the record fails to present-more than indications of potential control of the Lund Co. by the taxpayer. In effect the taxpayer has asked that affiliation be found because it owned 50 per cent of the stock of a corporation and employed the owner of the other 50 per cent; and in addition, because of numerous transactions between the two companies, some of which are unusually advantageous to one party or the other. The taxpayer has relied strongly upon the decision of this Board in the Appeal of Isse Koch & Co.; Inc., 1 B. T. A. 624. The appeals are clearly distinguishable in essentials. It has not been shown that the taxpayer exercised control of the stock of its employee Brandt nor that it could assert such control successfully. In the Koch appeal an enforceable contract of control, actually exercised, was shown. Even if it should be admitted for purposes of argument that potential control existed in this appeal, the actual exercise of that control should appear before affiliation is permitted, especially in view of the division of stock ownership. The taxpayer’s contract with Brandt is not in the record and the Board has no inkling of its content. We can not assume that by it Brandt’s stock is at the taxpayer’s ocmmand nor that it contains terms conducive to Brandt’s use of his stock as the taxpayer might direct. It is held, therefore, that the right to affiliation has not been established.