#### COLORADO CONTINENTAL LUMBER CO. v. THE UNITED STATES

[No. H-388.

Decided June 16, 1930]

*414*Mr. George E. H. Goodner*for the plaintiff. *Mr. Pawl D. Banning*was on the brief.

*Mr. George PL.*Foster, with whom was *Mr. Assistant Attorney General Hermán J.*Galloway, for the defendant.

*420Littleton, Judge,

delivered the opinion of the court:

Plaintiff insists that it has a right to maintain this suit and to have the court determine its right to include in invested capital, as a paid-in surplus, the alleged cash value of good will, on the ground that, although it did not make the inclusion in invested capital of good will a specific ground for its claim for refund, it was the duty of the commissioner to decide the case upon the facts before him, and that plaintiff had filed with the commissioner certain documents in which it claimed a substantial value for good will as the ground for special assessment.

Plaintiff further predicates its right to judgment upon the ground that it acquired a good will of a cash value of *421$50,000, and that, although this good will was acquired without cost or without the issuance of stock therefor, it may be included in invested capital as a paid-in surplus.

Conceding, without deciding, that plaintiff has a right to maintain this suit, it is not entitled to recover because under the statute a paid-in surplus may not be allowed in respect of an intangible asset. *Daily Pantagraph*v. *United States,*decided by this court June 10, 1929 [68 C. Cls. 251]; Herald-Despatch *Co.,*4 B. T. A. 1096; *Shope Brick Co.,*5 B. T. A. 1042; *J. M. & M. S. Browning Co.,*6 B. T. A. 914; *Daily Pantagraph Co.,*9 B. T. A. 1173; *Stephens-Admnson Mfg. Co.,*16 B. T. A. 41. Furthermore, even if a paid-in surplus might be allowed in respect of an intangible asset, there is a complete lack of proof of facts sufficient to establish a cash •value for any intangible asset that plaintiff may have acquired upon incorporation. The right gnmi to plaintiff by the Continental Tie & Lumber Company to sell the lumber products of the latter company on a commission basis in a certain territory was perhaps an advantageous arrangement, but this can not be regarded as the acquisition by the plaintiff of a valuable good will. The acquisition by the plaintiff from the Minnequa Company of certain selling agreements possessed by that company can not enter into invested capital as a paid-in surplus, or otherwise, because nothing was paid for this, and the Minnequa Company was not a stockholder. *A. C. F. Gasoline Co.,*6 B. T. A. 1337; *Frank Holton & Co.,*10 B. T. A. 1317.

In addition to the foregoing, plaintiff’s claim of value is not justified by the facts. Plaintiff asks the court to adopt the use of Hoskold’s formula, and apply it to earnings subsequent to the date on which the value of good will is claimed. The only basis for the application of this formula to subsequent earnings is that upon incorporation Schomburg and Bullen “ estimated ” that plaintiff would earn a net profit of at least $10,000 a year. This is not sufficient to justify the use of a formula; moreover, there are no facts to establish all of the necessary elements as a basis for the application of the formula. The facts show only the net earnings. There is no proof of the tangible assets em*422ployed in tbe business during the period from 1911 to 1916, inclusive, over which plaintiff seeks to arrive at an annual average to which it applies certain percentages.

The petition must be dismissed, and it is so ordered.

Williams, Judge; Green, Judge; and Booth, *GMef Jus*tice, concur.

This case was tried before the appointment of Wi-ialey, *.Judge.*He therefore took no part in its decision.