Williams, Judge,
delivered the opinion:
The plaintiff claims that during the taxable year ending May 31, 1923, it was, within the meaning of the applicable statutes, affiliated with two other corporations, to wit: M. Pokorny & Sons, Ltd., and Pokorny Estate, Inc.; that during the taxable years ending, respectively, May 31, 1924, and May 31, 1926, it was affiliated with M. Pokorny & Sons, Ltd.; and that it is entitled to have its tax liability for those years computed oh the basis of such affiliations instead of on its own separate return, as held by the Commissioner of Internal Revenue.
If plaintiff is entitled to have its taxes for the years in question computed upon the affiliated basis claimed, it has overpaid its taxes for the years 1923, 1924, and 1926, in the sum claimed, which amount it is entitled to recover, to-/ gether with interest as provided by law. J
The applicable provisions of the statutes as to the taxfes for the year 1923 are found in section 240, subdivisions/ (a) and (c) of the revenue act of 1921 (42 Stat. 227, 260)
“ (a) That corporations which are affiliated within the/ meaning of this section may, for any taxable year begin[467]*467ning on or after January 1, 1922, make separate returns or, under regulations prescribed by.the commissioner with the approval of the Secretary, make a consolidated return of net income for the purpose of this title, in which case the taxes thereunder shall be computed and determined upon the basis of such return. If return is made on either of such bases, all returns thereafter made shall be upon the same basis unless permission to change the' basis is granted by the commissioner.
* H* H* * H* * *
“(c) For the purpose of this section two or more domestic corporations shall be deemed to be affiliated (1) if one corporation owns directly or controls through closely affiliated interests or by a nominee or nominees substantially all the stock of the other or others, or (2) if substantially all the stock of two or more corporations is owned or controlled by the same interests.”
Section 240, subdivisions (a) and (c) of the revenue acts of 1924 (43 Stat. 253, 288), and 1926 (44 Stat. 9, 46) are the applicable statutes for the years 1924 and 1926, respectively — subdivision (a) of the two acts is identical with subdivision (a) of section 240. of the revenue act of 1921. Subdivision (c) of the said acts is somewhat changed and reads as follows:
“(c) For the purpose of this section two or more domestic corporations shall be deemed to be affiliated (1) if one corporation owns at least 95 per centum of the voting stock of the other or others, or (2) if at least 95 per.centum of the voting stock of two or more corporations is owned by the same interests. * * * ”
The plaintiff was engaged mainly in owning and renting real estate. The business of Pokorny Estate, Inc., was substantially the same a;s that of plaintiff. M. Pokorny & Sons, Ltd., was engaged in conducting retail shoe stores. The capital stock of the plaintiff consisted of 1,500 shares, of the par value of $100.00 each.
The stock of M. Pokorny & Sons, Ltd., consisted of 450 shares of the par value of $100.00 each.
The stock of Pokorny Estate, Inc., consisted of 1,494 shares, of the par value of $100.00 each.
[468]*468The stockholders of the three corporations, and the percentage of stock held by them in the respective corporations were:
Pokorny Realty Company
Nanie Haas Pokorny-o CO
Clara M. Pokorny-1;---o <N
Bertha Pokorny Kamien----o C-J
70%'
M. E. Levey_ M O
Coleman E. Adler_ M O
Julius Goldstein-^-M O
30%
M. Pokorny & Sons, Ltd.
Nanie Haas Pokorny.:_'_ 37.77%
Clara M. Pokorny_ 33.33%
Bertha Pokorny Kamien_:___ 6.67%
-77.77%.
Bella Pokorny Levey_ 6. 67%
Rosa Pokorny Adler_ 6.67%
Leonora Pokorny Goidstein___ 6. 67%
Ralph Pokorny Levey_ 2.22'%
22.23%'
Pokorny Estate, Ino.
Nanie Haas Pokorny_14.86%
Clara M. Pokorny_14. 86%
Bertha Pokorny Kamien_j._14.86%
44. 58%:
Bella Pokorny Levey_14. 86%
Rosa Pokorny Adler_14. 86%
Leonora Pokorny Goldstein._ 6. 67%
Hanna Pokorny Haas_10. 84%
- 55. 42%.
All the stockholders of the corporations involved are members of a single family, being the children, grandchildren,, sons-in-law, and. daughters-in-law of one Michael Pokorny,, deceased. The stock of the corporations was never voted in. the ordinary sense, all business matters relating to the conduct , of the corporations being arranged as a result of friendly discussions by the stockholders at family meetings.. Money was loaned between the various corporations without, security or interest, and properties were leased by the corporations from and to each other at rentals lower than that, [469]*469charged to outsiders. The business oí the three corporations was conducted as one enterprise.
The majority stockholders owning 70 per cent of the stock of the plaintiff, own 77.77 per cent of the stock of M. Pokorny & Sons, Ltd., and 44.58 per cent of the stock of Pokorny Estate, Inc. The minority stockholders owning 30 per cent of the stock of the plaintiff own no stock whatever in either of the other corporations. Minority stockholders owning 22.23 per cent of the stock of M. Pokorny & Sons, Ltd., own no stock in the plaintiff company. Majority stockholders owning 55.42 per cent of the stock of Pokorny Estate, Inc., own no stock in the plaintiff. It will be noted there is a wide divergence in the amount of stock held in the three companies by the majority stockholders of plaintiff, Nanie Haas Pokorny holding 30 per cent of the stock of plaintiff, 37.77 per cent of the stock of M. Pokorny & Sons, Ltd., and 14.86 per cent of the stock in Pokorny Estate, Inc.; Clara M. Pokorny owning 20 per cent of the stock of plaintiff, 33.33 per cent of the stock of M. Pokorny & Sons, Ltd., and 14.86 per cent of the stock of Pokorny Estate, Inc.; while Bertha Pokorny Kamien owns 20 per cent of the stock of plaintiff, 6.67 per cent of the stock of M. Pokorny & Sons, Ltd., and 14.86 per cent of the stock of Pokorny Estate, Inc.
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Williams, Judge,
delivered the opinion:
The plaintiff claims that during the taxable year ending May 31, 1923, it was, within the meaning of the applicable statutes, affiliated with two other corporations, to wit: M. Pokorny & Sons, Ltd., and Pokorny Estate, Inc.; that during the taxable years ending, respectively, May 31, 1924, and May 31, 1926, it was affiliated with M. Pokorny & Sons, Ltd.; and that it is entitled to have its tax liability for those years computed oh the basis of such affiliations instead of on its own separate return, as held by the Commissioner of Internal Revenue.
If plaintiff is entitled to have its taxes for the years in question computed upon the affiliated basis claimed, it has overpaid its taxes for the years 1923, 1924, and 1926, in the sum claimed, which amount it is entitled to recover, to-/ gether with interest as provided by law. J
The applicable provisions of the statutes as to the taxfes for the year 1923 are found in section 240, subdivisions/ (a) and (c) of the revenue act of 1921 (42 Stat. 227, 260)
“ (a) That corporations which are affiliated within the/ meaning of this section may, for any taxable year begin[467]*467ning on or after January 1, 1922, make separate returns or, under regulations prescribed by.the commissioner with the approval of the Secretary, make a consolidated return of net income for the purpose of this title, in which case the taxes thereunder shall be computed and determined upon the basis of such return. If return is made on either of such bases, all returns thereafter made shall be upon the same basis unless permission to change the' basis is granted by the commissioner.
* H* H* * H* * *
“(c) For the purpose of this section two or more domestic corporations shall be deemed to be affiliated (1) if one corporation owns directly or controls through closely affiliated interests or by a nominee or nominees substantially all the stock of the other or others, or (2) if substantially all the stock of two or more corporations is owned or controlled by the same interests.”
Section 240, subdivisions (a) and (c) of the revenue acts of 1924 (43 Stat. 253, 288), and 1926 (44 Stat. 9, 46) are the applicable statutes for the years 1924 and 1926, respectively — subdivision (a) of the two acts is identical with subdivision (a) of section 240. of the revenue act of 1921. Subdivision (c) of the said acts is somewhat changed and reads as follows:
“(c) For the purpose of this section two or more domestic corporations shall be deemed to be affiliated (1) if one corporation owns at least 95 per centum of the voting stock of the other or others, or (2) if at least 95 per.centum of the voting stock of two or more corporations is owned by the same interests. * * * ”
The plaintiff was engaged mainly in owning and renting real estate. The business of Pokorny Estate, Inc., was substantially the same a;s that of plaintiff. M. Pokorny & Sons, Ltd., was engaged in conducting retail shoe stores. The capital stock of the plaintiff consisted of 1,500 shares, of the par value of $100.00 each.
The stock of M. Pokorny & Sons, Ltd., consisted of 450 shares of the par value of $100.00 each.
The stock of Pokorny Estate, Inc., consisted of 1,494 shares, of the par value of $100.00 each.
[468]*468The stockholders of the three corporations, and the percentage of stock held by them in the respective corporations were:
Pokorny Realty Company
Nanie Haas Pokorny-o CO
Clara M. Pokorny-1;---o <N
Bertha Pokorny Kamien----o C-J
70%'
M. E. Levey_ M O
Coleman E. Adler_ M O
Julius Goldstein-^-M O
30%
M. Pokorny & Sons, Ltd.
Nanie Haas Pokorny.:_'_ 37.77%
Clara M. Pokorny_ 33.33%
Bertha Pokorny Kamien_:___ 6.67%
-77.77%.
Bella Pokorny Levey_ 6. 67%
Rosa Pokorny Adler_ 6.67%
Leonora Pokorny Goidstein___ 6. 67%
Ralph Pokorny Levey_ 2.22'%
22.23%'
Pokorny Estate, Ino.
Nanie Haas Pokorny_14.86%
Clara M. Pokorny_14. 86%
Bertha Pokorny Kamien_j._14.86%
44. 58%:
Bella Pokorny Levey_14. 86%
Rosa Pokorny Adler_14. 86%
Leonora Pokorny Goldstein._ 6. 67%
Hanna Pokorny Haas_10. 84%
- 55. 42%.
All the stockholders of the corporations involved are members of a single family, being the children, grandchildren,, sons-in-law, and. daughters-in-law of one Michael Pokorny,, deceased. The stock of the corporations was never voted in. the ordinary sense, all business matters relating to the conduct , of the corporations being arranged as a result of friendly discussions by the stockholders at family meetings.. Money was loaned between the various corporations without, security or interest, and properties were leased by the corporations from and to each other at rentals lower than that, [469]*469charged to outsiders. The business oí the three corporations was conducted as one enterprise.
The majority stockholders owning 70 per cent of the stock of the plaintiff, own 77.77 per cent of the stock of M. Pokorny & Sons, Ltd., and 44.58 per cent of the stock of Pokorny Estate, Inc. The minority stockholders owning 30 per cent of the stock of the plaintiff own no stock whatever in either of the other corporations. Minority stockholders owning 22.23 per cent of the stock of M. Pokorny & Sons, Ltd., own no stock in the plaintiff company. Majority stockholders owning 55.42 per cent of the stock of Pokorny Estate, Inc., own no stock in the plaintiff. It will be noted there is a wide divergence in the amount of stock held in the three companies by the majority stockholders of plaintiff, Nanie Haas Pokorny holding 30 per cent of the stock of plaintiff, 37.77 per cent of the stock of M. Pokorny & Sons, Ltd., and 14.86 per cent of the stock in Pokorny Estate, Inc.; Clara M. Pokorny owning 20 per cent of the stock of plaintiff, 33.33 per cent of the stock of M. Pokorny & Sons, Ltd., and 14.86 per cent of the stock of Pokorny Estate, Inc.; while Bertha Pokorny Kamien owns 20 per cent of the stock of plaintiff, 6.67 per cent of the stock of M. Pokorny & Sons, Ltd., and 14.86 per cent of the stock of Pokorny Estate, Inc.
It is obvious from this statement of stock ownership that the same interests did not own or control substantially all the stock of each of the three corporations during the year 1923, and that the same interests did not own at least 95 per cent of the voting stock of each of the corporations or any two of them during the years 1924 and 1926. Handy & Harman v. Burnet, 284 U. S. 136. The Supreme Court in the case cited had under consideration section 240 of the revenue a.ct of 1918, which is substantially the same as section 240 of the revenue act of 1921. The plaintiff corporation urged that it was affiliated with another corporation during the taxable period and in support of its claim contended: (1) That where two or more corporations are operating as a business and economic unit, actual control of the stock of the minority is sufficient whether or not based on legally enforcible means, and (2) that the word “ controlled ” as it appears in the statute is unqualified and that the court below in restricting [470]*470that word to be a control based upon legally enforcible means, refused to give to it its accepted meaning and made it practically synonymous with the word “ owned.” The court rejected these contentions, and held:
“ The section requires control of substantially all of the stock; control of the corporations is not enough. The carrying on of -a business' unit by two or more corporations does not in itself .constitute affiliation.
“The.purpose of sec. 240 was, by means of consolidated returns, to require taxes to be levied according to the true net income and invested capital resulting from and employed in a single business enterprise, .even though it was conducted by means of more than one corporation. Subsection (b) clearly reflects the intention, by means of such returns, to secure substantial equality as between shareholders who ultimately bear the burden. That intention is shown by the legislative history and was given effect by the regulations contemporaneously promulgated. It requires no discussion to show that such returns will not make against inequality or evasion unless the same interests are the beneficial owners in like proportions of substantially all of the stock of each of such corporations. Alameda Investment Co. v. McLaughlin, 28 F. (2d) 81. Montana Mercantile Co. v. Rasmusson, 28 F. (2d) 916. Commissioner v. Adolph Hirsch & Co., 30 F. (2d) 645, 646. Commissioner of Internal Revenue v. City Button Works, 49 F. (2d) 705. Affiliation on any other basis would not make against inequality or .evasion. It would require very plain language to show that Congress intended,to permit consolidated returns to depend on a basis so indefinite and uncertain as control of stock without title, beneficial ownership- or legal means to enforce it. Control resting solely on acquiescence, the exigencies of business, or other considerations having no binding force is not sufficient to satisfy the statute.”
The test of affiliation is that the same interests shall be the beneficial owners in like proportions of substantially all the stock of each of the corporations claiming affiliation (revenue acts of 1918 and 1921) and of at least 95 per cent of the voting stock of each of such corporations under the revenue acts of 1924 and 1926.
While, as the plaintiff suggests, the question as to whether ownership by members of the same family constitutes the same interests was not present in Handy & Harman v. Bur[471]*471net, supra, the comprehensive language of the court that “ control resting solely on acquiescence, the exigencies of business, or other considerations having no binding force is not sufficient to satisfy the statute ” (italics ours), definitely excludes control of stock on any basis other than beneficial ownership or means to enforce it. The Supreme Court further statéd that the intention of the statute was given effect by the regulations contemporaneously promulgated. These regulations were to the effect that ownership by the same interests must be ownership of stock in all the corporations in substantially like proportions.
Article 633 of regulations 45 provided that:
“ The words ‘ the same interests ’ shall be deemed to mean the same individual or partnership or the same individuals or partnerships, but when the stock of two or more corporations is owned or controlled by two or more individuals or by two or more partnerships a consolidated return is not required unless the percentage of stock held by each individual or each partnership is substantially the same in each of the affiliated corporations.” (Italics ours.)
Stock ownership in the corporations involved does not meet the requirements of the statutes, and the plaintiff is not entitled to the relief sought.
The petition will be dismissed. It is so ordered.
Whaley, Judge; LittletoN, Judge; GeeeN, Judge; and Booth, Chief Justice, concur.