This is an appeal from the determination of a deficiency in income and profits taxes for the fiscal year ended November 30, 1919, in the amount of $3,643.20. The taxpayer alleges abnormal conditions affecting its capital and income in that year and asks assessment under the provisions of section 328 of the Revenue Act of 1918.
FINDINGS OF FACT.
The taxpayer is a Nebraska corporation engaged in the business of wholesale millinery, with its principal office at Omaha.
The net income of the taxpayer for five years beginning December 1, 1916, and ending November 30, 1921, was by years as follows:
Net income. Loss.
Fiscal year ended November 30, 1917-$17, 781. 23
Fiscal year ended November 30, 1918- 20,468. 93
Fiscal year ended November 30, 1919- 35, 520. 87
Fiscal year ended November 30, 1920- 16, 222. 05
Fiscal year ended November 30, 1921-$7, 233. 78
Total_ 89, 993. 08 $7, 233. 78
Less loss- 7, 233. 78
Total net earnings for five years- 82, 759. 30
Average earnings for five years_ 16, 551. 86
The amounts of borrowed capital in the form of notes payable was, on the following specified dates during the year 1919, as follows:
Dec. 31, 1919. $85,448.40
Jan. 31, 1919. 106, 448.40
Feb. 28, 1919. 111, 448.40
Mar. 31, 1919. 176.448.40
Apr. 30, 1919. 103.948.40
May 31, 1919. 53,948.40
June 30, 1919. $53, 948.40
July 31, 1919-, 83, 948.40
Aug. 31, 1919-178, 948.40
Sept. 30, 1919. 273, 948. 40
Oct. 3L, 1919_. 148, 948.40
Nov. 30, 1919. 148, 948. 40
The average borrowed capital as above set forth for the year was $127,181.73. For the year 1917, the average borrowed capital was $62,385.56; for 1918, $75,531.73.
The total sales, total purchases, inventory at the close of each period, and the invested capital at the close of each period, that is, *493the net worth, was by years for the five-year period beginning December 1, 1916, and ended November 30, 1921, as follows:
A large amount of the borrowed capital represented by notes payable in the year 1919 resulted from the fact that the members of the corporation, its principal officers and stockholders, were indebted to it in large sums, aggregating at one time as much as $92,000.
During the year 1919 the principal officers of the corporation were M. A. Spiesberger, Jake Spiesberger, L. M. Cohn, and Edward Treller. Salaries were paid to these officers and deducted as expenses of the business in the amounts of $18,000, $9,000, $13,500, and $5,000, respectively.
DECISION.
The determination of the Commissioner is approved.
ARUndell not participating.