Court Opinion

ID: 4593850
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:11:40.28322+00
Date Added: 2024-06-11T07:59:15.817140
License: Public Domain

Harry Edell and Lewis H. Edell, a Copartnership, Doing Business as Harry Edell, Petitioner, v. United States of America, RespondentEdell v. United StatesDocket No. 882-R.United States Tax Court28 T.C. 601; 1957 U.S. Tax Ct. LEXIS 162; June 10, 1957, Filed 1957 U.S. Tax Ct. LEXIS 162">*162  1. Held, (a) that contracts between petitioner and each of its several principals provided that petitioner would sell or attempt to sell products of a principal to a department of the Government, and would solicit, attempt to procure, and procure Government contracts for a principal; and (b) that under each of such contracts petitioner's compensation for its services was contingent upon the procurement of a Government contract; and that, therefore, (c) each of the contracts between petitioner and its principals was a subcontract within the provisions of section 403 (a) (5) (b) (i) and (ii) of the Renegotiation Act of 1942, as amended, and the commissions received by petitioner under each of such contracts are subject to renegotiation.2. The amount of excessive profits for each of the years 1943, 1944, and 1945 is determined.  William J. Casey, Esq., and Edward J. Brady, Esq., for the petitioner.Harland F. Leathers, Esq., and James H. Prentice, Esq., for the respondent.  Harron, Judge.  HARRON 28 T.C. 601">*601  The respondent determined by orders dated June 9, 1949, that the petitioner realized excessive profits for the years 1943, 1944, and 1945, derived from contracts and subcontracts subject to renegotiation in the amounts of $ 25,735, $ 85,541, and $ 170,377, respectively, or a total of $ 281,653 for the 3 years.  Respondent now claims that petitioner realized excessive profits for the years 1943, 1944, and 1945, in the amounts of $ 36,000, $ 84,000, and $ 120,000, or a total of $ 240,000 for the 3 years.Petitioner has abandoned some of the issues presented by the pleadings.  The issues remaining for decision are: (1) Whether petitioner, 28 T.C. 601">*602  during the years 1943, 1944, and 1945, was a party to any subcontracts as defined by section 403 (a) (5) (B) of the Renegotiation Act of 1942, as amended, so as to make its profits under such arrangements1957 U.S. Tax Ct. LEXIS 162">*164  subject to renegotiation. (2) If any of the earnings of petitioner for any of the years involved are subject to renegotiation, what amount of such earnings constituted excessive profits, if any.FINDINGS OF FACT.On December 22, 1942, Harry Edell and his brother, Lewis Edell, formed a partnership, hereinafter called the partnership, under a written agreement, which began business on January 1, 1943, and had an office in New York City.  At that time, Harry Edell lived in New York City and Lewis Edell lived in Brooklyn.  The terms of the partnership agreement and other facts relating to the partnership are set forth hereinafter.  Harry Edell was the more active member of the partnership and its formation was his idea.  He is referred to hereinafter as Edell.Prior to 1942, Harry Edell was engaged in various pursuits, as follows:For 2 years prior to 1918, he was a field manager for the General Petroleum Company of Texas, which was partly owned by members of his family.  In 1918, he went to New York City where he was associated with a hat factory as assistant manager, and later as general manager, until 1920 when the business was dissolved.  He then bacame factory manager of the Botany1957 U.S. Tax Ct. LEXIS 162">*165  Straw Works in New York City until that business was dissolved in 1923.  For the next 10 years, he was part owner, vice president, and general manager of the Herbel Hat Company until it was dissolved in 1934.  Thereafter, until sometime in 1936, he was in the business of manufacturing women's hats under the name of the Harry Edell Company.  From sometime in 1936 until about 1937, he was employed by the Ferber Millinery Company, for whom he arranged the leases of millinery departments in department stores in various parts of the country.  In 1937, he went into the millinery manufacturing business with another, doing business under the name of the Crickett-Rudley Corporation.  On January 31, 1938, Harry Edell was adjudged bankrupt, on his own petition.  He was discharged from bankruptcy on November 22, 1938.  The trustee in bankruptcy filed a return of no assets, and the case was closed on June 17, 1940.  In 1939, he suffered a nervous breakdown, and he was inactive until 1942, during which time he used the proceeds of some health insurance policies for his support.On his income tax return for 1938, Harry Edell reported gross income in the amount of $ 5,150, which represented his salary1957 U.S. Tax Ct. LEXIS 162">*166  from the Ferber Millinery Company.28 T.C. 601">*603  Harry Edell was not an engineer; he had no technical training; he had no formal education beyond high school except for incidental courses in public speaking and some other subjects.Early in 1942, Harry Edell was able to resume business activities.  In an effort to help Edell develop some new business pursuits, two friends took him to the Philadelphia Quartermaster Depot to acquaint him with Government facilities which had been established to help manufacturers to enter war production.  Also, they introduced him to Lawrence Dodge of the Dodge Textile Company in Providence, Rhode Island.Edell entered into a contract with Dodge in early 1942, whereby Edell was to perform certain services for Dodge which are described hereinafter.  Edell performed services for Dodge under this contract during 1942.On March 30, 1942, Edell entered into an agreement with the Atlantic Knitting Company, Inc., of Providence, Rhode Island, hereinafter called Atlantic Knitting.  The terms of this agreement are set forth hereinafter.  Edell performed services for Atlantic Knitting during 1942.Also, in 1942, Edell entered into an agreement with the Supply Manufacturing1957 U.S. Tax Ct. LEXIS 162">*167  Company, New York, New York, hereinafter called Supply, the terms of which are set forth hereinafter.  Edell performed services during 1942 under this contract.During 1942, Edell received payments from Dodge, Atlantic Knitting, and Supply, in the total amount of $ 16,321.78 which were reported in his income tax return for 1942, as follows:Dodge Textile Company$ 10,981.88Atlantic Knitting Company3,400.00Supply Manufacturing Company1,939.90Total16,321.78Expenses8,500.00Net Income7,821.78When Edell and his brother created a partnership on December 22, 1942, Edell assigned his contracts with Dodge, Atlantic Knitting, and Supply, to the partnership; he did not contribute any cash to the capital of the partnership. Lewis Edell Loaned $ 5,000 to the partnership. This amount constituted the capital of the partnership.In 1942 and thereafter, during 1943, 1944, and 1945, Lewis Edell, hereinafter called Lewis, was employed as a sales agent for several sportswear manufacturing concerns.  In his income tax returns for 1941 and 1942, he reported gross income in the amounts of $ 1,960 and $ 1,100, respectively.  Lewis died in 1949.  Accordingly, there1957 U.S. Tax Ct. LEXIS 162">*168  is no testimony of Lewis in the record of this case.28 T.C. 601">*604  The material parts of the Edell partnership agreement dated December 22, 1942, which was executed by Harry and Lewis Edell, are as follows:Whereas, Harry has for some time past been in the business of representing manufacturers in negotiations for contracts with United States Government and Departments thereof, and assisting said manufacturers in performing said contracts, andWhereas, Harry is in need of assistance to conduct and enlarge said business and is also in need of additional finance for the same, andWhereas, it is the desire of both parties to form a partnership to carry on the business formerly conducted by Harry;Now Therefore, It is Mutually Agreed as Follows:FIRST: That the parties hereto shall, as partners, engage in the business of representing manufacturers and suppliers of merchandise in the preparation of invitations and negotiations for contracts between said manufacturers and suppliers and the United States Government and departments thereof and for its allies, and assisting said manufacturers in performing contracts.SECOND: That the partnership shall continue doing business under the 1957 U.S. Tax Ct. LEXIS 162">*169  name of Harry Edell and the office or place for which said business shall be conducted shall be at 66 Leonard Street, Borough of Manhattan, City of New York.THIRD: Harry hereby assigns to the partnership, the following written contracts which were heretofore made with him personally:1. Supply Manufacturing Co. Inc.  -- 34 University Place, N. Y., dated May 11th, 1942;2. Atlantic Knitting Company, Inc.  -- 75 Eagle Street, Providence, Rhode Island, dated March 30th, 1942;3. One-half interest in agreement made with L. M. R. V. Corp. -- 48 East 21st St., N. Y. dated December 3rd, 1942.All contracts to be obtained in the future for convenience shall be made out in the name of Harry Edell individually.  However, it is understood and agreed that the said Harry Edell upon obtaining said contract shall be acting as the agent of the partnership, and the said contracts shall enure to the benefit of the partnership immediately upon the procurement thereof by Harry.FOURTH: That Lewis shall contribute to the partnership the sum of $ 5,000.00 in cash, which shall be used by the partnership for the promotion of the business, which sum however shall be considered a loan to the partnership, 1957 U.S. Tax Ct. LEXIS 162">*170  and shall be repaid to Lewis as hereinafter provided in Paragraph Eighth herein.FIFTH: That all checks, notes, cash or monies to be received by the partnership, shall be received in the name of Harry Edell individually and the same shall be held by him on behalf of the partnership. That the said monies shall be kept by said Harry Edell, separate and apart from any of his personal funds until the distribution thereof as hereinafter provided.  That in the event the partners decide to open a bank account, the same shall be opened in the name of Harry Edell, but all funds deposited therein shall be considered the funds of the partnership and the said Harry shall act as trustee thereof on behalf of the partnership.* * * *SEVENTH: (a) That full and accurate accounts of the transactions of the partnership shall be kept in proper books; and each party shall cause to be entered into the said partnership books, a full and accurate account of all his transactions in behalf of the partnership;28 T.C. 601">*605  (b) That the books of the partnership shall be kept at the place of business of the partnership, and each party shall, at all times, have access to and may inspect and copy any of 1957 U.S. Tax Ct. LEXIS 162">*171  them.EIGHTH: That the profits and losses shall be divided as follows:(a) As soon as there are sufficient profits in the partnership funds, after the deduction of all expenses of the business, the $ 5,000.00 loan made by Lewis shall be repaid to him.(b) After deduction of all expenses incurred in the operation of the business and the repayment of the $ 5,000.00 loan to Lewis, the first $ 10,000.00 in profits shall be paid to Harry.(c) After the aforementioned payments, all net profits or net losses shall be divided equally between the parties hereto and the account of each shall be credited or debited as the case may be for his proportionate share thereof.(d) Division of profits or apportionment of losses shall be made periodically upon mutual agreement of the parties.NINTH: That the term of the partnership shall begin on the 1st day of January 1943, and shall terminate six months after the war is ended.TENTH: That, at the termination of this partnership by the expiration of its term, or by reason of any other causes, the assets, liabilities and income, both gross and net, shall be ascertained, the debts of the partnership shall be discharged, all remaining assets1957 U.S. Tax Ct. LEXIS 162">*172  shall be reduced to cash, and this cash shall be distributed to the partners in accordance with their respective capital accounts.During the years involved, 1943-1945, and also during 1946, practically all of the work done for the Edell partnership was performed by Harry Edell; Lewis's services were minor, if not negligible.At the end of 1942, Harry Edell was in contact with four corset manufacturing companies which wished to enter war production.  Edell suggested that the four companies organize a fifth company, to be known as the L. M. R. V. Corporation, with a separate factory to be devoted to production of goods and materials for the Government, i. e., having a war-end use, and that each of the existing four companies contribute a nucleus of machinery and labor to the new company.  The suggestion was carried out.  Edell then entered into a contract with L. M. R. V., which is referred to hereinafter.  Edell received no compensation from L. M. R. V. in 1942.During either 1943, or 1944, or 1945, Edell, for the partnership, made arrangements with other corporations.  Accordingly, services were performed for the following corporations during 1943-1945, and Edell received payments1957 U.S. Tax Ct. LEXIS 162">*173  from each corporation, all of which are involved under the issues presented:1. Dodge Textile CompanyProvidence, Rhode Island2. Atlantic Knitting CompanyProvidence, Rhode Island3. Supply Manufacturing CompanyNew York, New York4. L. M. R. V. CompanyNew York, New York5. Artex-Green CorporationLong Island, New York6. Colonial Knife CompanyProvidence, Rhode Island7. Wiley-Bickford-Sweet CompanyWorcester, Massachusetts8. Brewer & CompanyWorcester, Massachusetts28 T.C. 601">*606  Some services were performed for an additional concern, William Glucken & Company, in New York City, but the parties are agreed that compensation received by petitioner from this corporation represents income which is not subject to renegotiation.For the years 1943, 1944, and 1945, the partnership filed Federal partnership returns, on a cash basis, in which were reported the amounts received by the partnership from various ones of the companies listed above, as follows:YearGross receipts1943$ 59,392.541944142,546.081945161,539.91Total363,478.53In addition, petitioner received, after 1945, from various ones of the companies listed above, amounts aggregating1957 U.S. Tax Ct. LEXIS 162">*174  $ 65,000, less expense of $ 30,000, or a net amount of $ 35,000, which sum was attributable to services rendered during the years 1943-1945, inclusive.During the years in question, the partnership had only one employee, Harry Edell's wife, who acted as his secretary.  She received a salary of $ 4,000 per year.Reference has been made above to the fact that in 1942, Edell entered into agreements with Dodge, Atlantic Knitting, and Supply, which were assigned to the Edell partnership, and to the fact that after 1942, the partnership, through Edell, entered into agreements with five other corporations, namely, L. M. R. V., Artex-Green Corporation, Colonial Knife Company, Wiley-Bickford-Sweet Company, and Brewer & Company.  Before setting forth the terms of the agreements with each one of the eight corporations, it is appropriate to state, in general and briefly, what the peacetime business of each company was.Prior to entering into agreements with Edell or the partnership, none of the eight companies listed above had obtained any contracts for production of goods having a war-end use, except that Colonial Knife had produced incendiary fuses under a subcontract, but this subcontract 1957 U.S. Tax Ct. LEXIS 162">*175  proved to be unprofitable, because Colonial Knife was not properly equipped for producing incendiary fuses.  The prewar business of each of the eight companies was as follows: Dodge manufactured women's housedresses; Atlantic Knitting produced knitted cloth for the ladies' garment trade; Supply serviced shoe manufacturers by cutting leather into strips; L. M. R. V. was a new company formed by four corset manufacturing concerns; Artex-Green manufactured venetian blinds; Colonial Knife manufactured small jackknives and metal novelties; Wiley-Bickford manufactured ladies' slippers; and Brewer manufactured pharmaceuticals, candy, and abdominal belts.28 T.C. 601">*607  The record does not show how Edell originally made contact with each of the eight companies, but it appears that initially he contacted some of them, and that some of them initially contacted him.  Prior to entering into agreements with Edell or the partnership, all of the companies were desirous of obtaining contracts for production of goods having a war-end use, because they could not obtain Government priorities for the materials and labor which they required to remain in full production, unless they were engaged in the production1957 U.S. Tax Ct. LEXIS 162">*176  of products for the Government.  Some of the companies had tried to obtain Government contracts, but their efforts had been unsuccessful.  Prior to making contracts with petitioner, the corporations involved here apparently had not acquired the experience or the assurance to deal directly with representatives of the Government for the purpose of obtaining Government contracts.  They were small business concerns and they were faced with the necessity of converting their plants so as to produce other products, as well as with the problem of obtaining materials.  The services which Edell offered the companies included obtaining information from Government representatives, preparing bids, and carrying on dealings on their behalf, as their representative.  The companies entered into agreements with petitioner through Edell because they believed that he could obtain Government contracts for them.As has been noted above, three of the agreements under which payments were made to the partnership, those with Dodge, Atlantic Knitting, and Supply, were made by Edell in 1942.  The partnership performed services for these three corporations; it appears that it received payments from these three1957 U.S. Tax Ct. LEXIS 162">*177  corporations in 1943 only, and not in 1944 or 1945.  The partnership entered into agreements with L. M. R. V., Artex-Green, Wiley-Bickford, and Brewer during 1943, and performed services for these four corporations.  It appears that the partnership received payments from these four companies during 1943, 1944, and 1945.  The partnership entered into an agreement with Colonial Knife in 1943.  It appears that it performed services for and received payments from that corporation during 1944 and 1945.  1Each of the eight corporations, listed above, which entered into agreements with Edell, for the partnership, converted1957 U.S. Tax Ct. LEXIS 162">*178  its plant to enable it to produce goods desired by agencies of the Government, and each received contracts from the Government under which goods were produced.  Under such Government contracts, the corporation 28 T.C. 601">*608  made articles and goods as follows: Dodge converted its plant to make and made mattress covers, pillow cases, butchers' aprons, bandoleers, and insect bars.  Atlantic made knitted cloth for linings of Army overcoats, for gloves, and for blankets.  Supply made dufflebags, medical kits, and a machine kit.  L. M. R. V. made mattress covers and sailor hats.  Artex made mattress covers, dufflebags, and a non-inflammable wastepaper basket for use in houses built for Navy Yard workers.  Colonial made a giant jackknife which was used by the Air Corps and was part of the equipment in the so-called Knutson Vest, and a hunting knife which was used by the Navy.  Wiley-Bickford-Sweet made parkas, jungle hammocks, sleeping bags, clothing bags, life preservers, and insect bars.  Brewer & Company made abdominal belts, antibiotics, multiple-vitamin capsules, and hard candies.Under each agreement with each of the eight companies, the partnership was to be paid, and was in fact paid, 1957 U.S. Tax Ct. LEXIS 162">*179  commissions varying from 2 1/2 per cent to 5 per cent of the amounts of sales by the companies to the Government under Government contracts and subcontracts. A letter from Colonial Knife to Edell dated January 25, 1943, stating the terms of its understanding with the partnership, contained the following provisions: "Your compensation for all of these services will be an amount equal to 5% of the deliveries made on orders received by us from the governmental agencies." A memorandum of agreement between the partnership and each of the other companies contained a substantially similar provision.  Under each agreement, the partnership was not to receive payment of any amount unless Government contracts or subcontracts were awarded to the company; the amounts payable to the partnership under the agreements were dependent upon the amount of such Government contracts and subcontracts.Some of the agreements provided for advances to be paid to the partnership, but only Wiley-Bickford and Brewer in fact paid the partnership any advances.  Wiley-Bickford paid advances to the partnership in the amount of $ 50 per week throughout 1943-1945, inclusive, and Brewer paid advances in the amount of1957 U.S. Tax Ct. LEXIS 162">*180  $ 50 to the partnership from time to time during 1943 and 1944.  However, the total amounts which the partnership received from Wiley-Bickford and Brewer were determined on the basis of a fixed percentage of the payments received by Wiley-Bickford and Brewer from the Government.Except for the advances referred to above, the partnership did not receive any payments from any of the eight companies until after Government contracts had been awarded to the companies and deliveries had been made to and accepted by the Government and payment 28 T.C. 601">*609  had been received by a company from the Government.  Each company then paid the partnership a fixed percentage of the payments it had received from the Government.Commissions were paid to the petitioner on all sales made by its principals to the Government, whether the petitioner actually procured the sales contracts or not.Under all of its agreements with the eight companies, the petitioner was not reimbursed for any traveling or other expenses.Each agreement which the partnership made with the eight companies provided that Edell was to render a variety of services to the companies, such as: To secure comparative information of previous1957 U.S. Tax Ct. LEXIS 162">*181  bids submitted to the Government by competitors for similar products; to endeavor to secure special priorities when needed; to assist in the preparation of material needed for the negotiation, or renegotiation, of contracts with the Government, and the termination thereof; to assist in research and development of products requested by or suitable for Government agencies; to service all orders which the companies might secure from Government agencies; to assist in preparing and securing technical analyses of costs; to assist in locating sources of supplies for both materials and packages and in securing the same; to assist in securing reinspection, laboratory tests, and disposal of any materials furnished which might be rejected for any reason; and to expedite payment of invoices submitted.  Edell was given the right to represent the companies in various Government agencies, and in the case of some of the companies, in all Government agencies.Edell, acting for petitioner, procured at least one Government contract, or subcontract, for each of the eight companies listed above.  He carried on a number of activities in soliciting and procuring such contracts, acting as a representative1957 U.S. Tax Ct. LEXIS 162">*182  of the companies.  He advised his principals of the products the Government wanted.  His activities led to the issuance of invitations to his principals to bid on Government contracts.  He also negotiated the terms of contracts between his principals and Government agencies.Examples of Edell's activities on behalf of each of the eight clients of petitioner are as follows: On November 10, 1942, Edell wrote to Navy Ordnance, on behalf of Supply, in part, as follows:Enclosed please find break-down of our costs for manufacturing of Poncho Type 2.We are desirous of negotiating this contract with you and feel you might be interested in its actual cost.On July 5, 1942, Edell wrote to Dodge, in part, as follows:This confirms my telephone report to you of my negotiations held yesterday July 4th, with the Navy officials, regarding your bid for Neg 4446 (Mattress Covers).28 T.C. 601">*610  On July 19, 1942, Edell wrote to Dodge, in part, as follows:As per my telephone conversation with you from Philadelphia yesterday (July 18th), please be advised that Frankford Arsenal through Mr. Van Dyke, authorized me to have you manufacture 100,000 additional bandoleers.On October 6, 1942, Edell wrote1957 U.S. Tax Ct. LEXIS 162">*183  to Dodge, in part, as follows:Also relative to our previous conversation, please advise me if you are ready to accept an increase in your bandoleer production, as arrangements for this additional award has been made by me.  As I mentioned to you last Saturday, it is important that you accept this business immediately.  [Emphasis added.]On October 30, 1942, Edell wrote to Dodge, in part, as follows:There also might be a possibility of my negotiating an award for you prior to November 18th, if you advise me of your desires at once.On October 30, 1942, Edell wrote to Dodge, in part, as follows:Philadelphia Quarter Master Depot are interested in securing bids on 425,000 Aprons, B., B & C W/BiB same as you are making for them at present.  Bids must be presented before November 18, 1942.On November 6, 1942, Edell wrote to Dodge, in part, as follows:Please be advised that the Navy is interested in securing bids on 3,000,000 mattress covers, Type A.  Bids must be returned by November 17th.  Manufacturer must provide all materials.On May 26, 1943, Edell wrote to Ravenna Ordnance Plant, on behalf of Dodge, in part, as follows:We are manufacturing bandoleers of the N 1 and1957 U.S. Tax Ct. LEXIS 162">*184  M 1906 type for the Frankford Arsenal.  Would you kindly advise us if we can serve you also in the like fashion.On August 7, 1943, Edell wrote to the Jeffersonville Quartermaster Depot, on behalf of Artex-Green, in part, as follows:Will you kindly place us on your list of invitations to bid on the following items:On October 6, 1943, Artex-Green wrote to Edell, in part, as follows:I mention this because it is my understanding on your next Washington trip, you might solicit some further business.On January 5, 1943, Edell wrote to Atlantic, in part, as follows:You are positively going to get an order from the Philadelphia Quarter Master for the:On September 18, 1943, Edell wrote to Atlantic, in part, as follows:I spent two days in Philadelphia trying to get the Philadelphia Quarter Master to take your overage of 20 ounce cloth.On November 16, 1944, Edell wrote to the Navy Department, on behalf of Atlantic, in part, as follows:Would you kindly advise us if you have any requirements which could utilize 45 pieces of 20 ounce O. D. Knitted Cloth, approximately 54 to 55 inches in width.  This cloth was manufactured for us, beyond our contractual yardage requirements1957 U.S. Tax Ct. LEXIS 162">*185  for the Philadelphia Quartermaster Depot, and is as per specification.28 T.C. 601">*611  On August 7, 1943, Edell wrote to Wright Field Material Division, on behalf of L. M. R. V., in part, as follows:We are interested in bidding on the following items, and would appreciate receiving invitations from you for them:On January 17, 1951, L. M. R. V. addressed a letter "To Whom it may concern," in part, as follows:This is to advise that Mr. Harry Edell was employed by us to help in obtaining orders from government agencies.On January 31, 1943, Edell wrote to Brewer, in part, as follows:In the meantime the Overseas Department are interested in securing our quotation on lemon drops and fruit balls of various flavors, all of course to be made of hard texture.On January 31, 1943, Edell wrote to Brewer, in part, as follows:If advisable, I would like someone who is familiar with the manufacturing of this candy to meet me in New York so that we can arrange an appointment and discuss with the contractual offices.On September 2, 1943, Edell wrote to the St. Louis Medical Depot, on behalf of Brewer, in part, as follows:Will you kindly place us on your list of invitations for all forms1957 U.S. Tax Ct. LEXIS 162">*186  of tablets and ampules, particularly --[List of items omitted.]We are also manufacturers of all types of Surgical Wearing Appliances and Elastic Bands, Stockings, etc., which we would like to bid on also.On April 2, 1946, Edell wrote to Brewer, in part, as follows:It must be very obvious to you that the securing of these contracts, plus all my servicing, entailed considerable time and expense, and since the government permits us a profit on the different manufacturing stages of these terminated awards, I am entitled to my proportionate share of the same.  [Emphasis added.]On June 11, 1943, Edell wrote to Wiley-Bickford, in part, as follows:Inasmuch as the U. S. Government wish 37,000,000 of this item, it may be possible that if you put in a successful bid for a large quantity, you could use the facilities of both these factories.On June 11, 1943, Edell wrote to the Philadelphia Navy Yard, on behalf of Wiley-Bickford, in part, as follows:We are thoroughly familiar with the manufacturing of such items as the following and would be grateful if you would place us on your list of invitations to bid for same:On June 12, 1943, Edell wrote to Wiley-Bickford, in part, 1957 U.S. Tax Ct. LEXIS 162">*187  as follows:Please be advised that the Boston Quartermaster are interested in securing a large quantity of insoles, felt for Ski Boots.  I am enclosing the specification for same and would appreciate your telephoning the Boston Quartermaster office, asking them for an invitation.28 T.C. 601">*612  On July 5, 1943, Edell wrote to Wiley-Bickford, in part, as follows:I have just completed arrangements subject to the last man's signature for us to manufacture 30,000 preserver Knapsacks at $ 4.75 net F. O. B. factory.On July 14, 1943, Edell wrote to Wiley-Bickford, in part, as follows:As we have been successful in obtaining the additional contract, due to your efforts, we naturally are very much concerned in the completion of this contract on time.On April 27, 1944, Edell wrote to Wiley-Bickford, in part, as follows:I have not gone beyond the above points in our negotiations as I am at a loss to arrive at a final price decision, without your assistance, but I would like to emphasize that you come here as quick as possible while this matter is still of interest to them.On May 3, 1944, Edell wrote to the Philadelphia Navy Yard, on behalf of Wiley-Bickford, in part, as follows:This 1957 U.S. Tax Ct. LEXIS 162">*188  will confirm my conversation and offer of yesterday's date with you at the Philadelphia Navy Yard.We will manufacture for you sixty thousand (60,000) Jacket type Preservers, under the terms and conditions as follows:On June 1, 1944, Edell wrote to Wiley-Bickford, in part, as follows:I have completed negotiations with the U. S. Navy to manufacture:Minimum of50,000 Preserver-Life JacketType at $ 4.85 net f. o. b. factory.On June 1, 1944, Edell wrote to Wiley-Bickford, in part, as follows:I have completed negotiations with the U. S. Navy to manufacture:On a letter from Wiley-Bickford, to Edell, dated June 13, 1944, Edell made a handwritten notation, as follows:Arranged supplemental order to take care of balance in visit to P. Q. M. Dept. HEdellOn August 3, 1944, Edell wrote to the Philadelphia Quartermaster Depot, on behalf of Wiley-Bickford, in part, as follows:The attached bid is submitted to you with the understanding that we will have the privilege of discussing any award contemplated for us before its closing.On August 8, 1944, Edell wrote to Wiley-Bickford, in part, as follows:This will confirm my telephone conversation with you of yesterday's date. 1957 U.S. Tax Ct. LEXIS 162">*189  Please be advised that I renegotiated our life preserver contract with the U. S. Navy officials and we are to receive 50,000 units at $ 4.70 each, f. o. b. factory, plus whatever extra charges will be added to this price for the changes in the new blueprints.On August 18, 1944, Edell wrote to Wiley-Bickford, in part, as follows:This will confirm the fact that I negotiated a contract for us for the JACKET LIFE PRESERVER as per the new blueprints, as follows:28 T.C. 601">*613  On January 23, 1945, Edell wrote to the Philadelphia Quartermaster Depot, on behalf of Wiley-Bickford, in part, as follows:Confirming conference held today with Mr. Harry Edell we hereby offer to make 32,000 Bags, Clothing, Waterproof, conforming to specification PQD 229D dated 5 May 1944 with exceptions as noted in NEG 36-030-45-NEG-230 at a price of $ 1.56 1/2 as had.On March 15, 1945, Edell wrote to Wiley-Bickford, in part, as follows:Confirming my telephone conversation with you today, please be advized that we will receive an official award by mail next week, the contents of which will be as follows:On April 14, 1944, Edell wrote to the Philadelphia Navy Yard, in part, as follows:Therefore, we respectfully1957 U.S. Tax Ct. LEXIS 162">*190  submit the following proposal to you in order that this continuity of production may be maintained: Beginning July 1st, 1944, we will deliver 10,000 Jacket Type Life Preservers as per present specifications -- monthly -- until the end of the year.  Total 60,000 [sic] Units at $ 5.05 each -- f. o. b. factory.On January 29, 1943, Edell wrote to Colonial, in part, as follows:I spoke to General B. O. Lewis of the Boston Ordnance, by long distance this morning, and he was very much interested in seeing that we receive the work which we want on the Trench Knife M-3.On January 29, 1943, Edell wrote to Colonial Knife, in part, as follows:Do not waste any time because I am sure we can get the business either from the Small War Plants or the Boston Ordnance Department, both of whom have some business to issue on the item.On April 17, 1943, Edell wrote to Colonial, in part, as follows:I have conferred with the procurement offices here at Wright Field about the hunting knife and have left one with them inclosed in the sheath.On June 8, 1943, Colonial wrote to Edell, in part, as follows:If you ever have the opportunity to quote on this knife, you can offer it at the above1957 U.S. Tax Ct. LEXIS 162">*191  price.On October 19, 1943, Edell wrote to Army Ordnance, in part, as follows:Mr. Antonio Paolantonio and myself dropped into your office last Friday for the purpose of showing you personally, a sample of the M-3 Knife which we manufacture, as per your specifications.On December 21, 1943, Edell wrote to Colonial Knife, in part, as follows:please be advised that I have succeeded in securing for you the following contract:50,000 knives at $ .68 eachContract No. NX-4475528 T.C. 601">*614  On January 17, 1944, Edell wrote to the Jersey City Quartermaster Depot, on behalf of Colonial Knife, in part, as follows:Confirming my telephone conversation with you, please be advised that we would greatly appreciate receiving invitations from you to bid on Hunting Knives and Combat Utility Knives.  We are making these at present for the Navy and Marine Corps.  We can also manufacture the M-3 Army Ordnance Knife and certain kinds of Scout Knives.On January 17, 1944, Edell wrote to Colonial Knife, in part, as follows:Please permit me to call your attention to the fact that there is a considerable amount of government business to be secured on two, three, and four bladed scout knives.  The1957 U.S. Tax Ct. LEXIS 162">*192  Jersey City Quartermaster and the Post Exchange both requested them from me within the last few days.On November 9, 1944, Edell wrote to the Navy Department, on behalf of Colonial Knife, in part, as follows:We would quote you on the basis of large procurement, that is, an initial procurement of approximately 50,000 of these knives as follows:On July 19, 1945, Edell wrote to the U. S. Aviation Supply Office in Philadelphia, on behalf of Colonial Knife, in part, as follows:I would greatly appreciate hearing from you as to whether you have found it possible to increase the present award of 100,000 Jiant Jack Knives, or the introduction of a new order.On August 7, 1945, Edell wrote to the U. S. Marine Corps, Washington, D. C., on behalf of Colonial Knife, in part, as follows:As per conference with our Mr. Edell we are sending to you under separate cover via parcel post 12 of our Jiant Jack Knives.On June 13, 1944, Edell wrote to a Government contractor, in an effort to obtain a subcontract for one of the partnership's clients, in part, as follows:The original contracts for the Hoods and Bags were secured by me and manufactured during 1943 by Supply Manufacturing Company1957 U.S. Tax Ct. LEXIS 162">*193  and the groundwork for the Sleeping Bag invitation was arranged by me during 1943.In soliciting and procuring Government contracts for a company, Edell proceeded, in general, as follows: He went through the company's plant; he obtained a list of its machinery and equipment; he took the list to various Government procurement departments or depots; he obtained the opinion of technical personnel in a department as to what products to be purchased by the department could be manufactured with the client's equipment, and what additional equipment the client would have to acquire in order to manufacture such products; he conveyed this information to the client; he obtained specifications and samples of products which Government procurement offices wanted to purchase and brought these back to the client.28 T.C. 601">*615  Edell obtained information for the companies, from Government procurement offices, as to contracts on which invitations to bid were going to be issued, and he requested that the companies be invited to bid on such contracts.  If the Government agency required that a company's plant be inspected and approved before it was invited to bid, Edell arranged for such inspection and approval. 1957 U.S. Tax Ct. LEXIS 162">*194  He obtained information from the Government, and from other manufacturers, as to prices at which contracts had been previously awarded, and also cost and technical data, for the use of the companies in preparing their bids. He often also assisted and advised in the preparation of bids. He contacted Government procurement offices to stimulate interest in his principals' products, and he secured promises of the award of contracts.A considerable portion of Edell's time was spent in servicing contracts given to his principals by various Government agencies.  Edell arranged for executives and employees of his principals to study the operations of other companies producing the same items; he obtained priorities for materials and labor; he located sources of materials and machinery required by his principals; and he expedited payments by the Government to his principals.Neither Harry nor Lewis Edell was a bona fide executive officer, partner, or full-time employee of any of the eight corporations.The partnership contributed to the efficiency of the eight companies by obtaining contracts and materials which kept their equipment and labor operating at full capacity.Petitioner assumed1957 U.S. Tax Ct. LEXIS 162">*195  no substantial risks.  Even though it was never certain that any particular contract which Edell sought to obtain for one of his principals would be awarded, when contracts were awarded, the principals were bound to complete the contracts, and petitioner then received return for its costs and efforts in obtaining the contracts.  Petitioner made no significant inventive or developmental contribution to the war effort.Petitioner made a significant contribution to the war effort in obtaining technical assistance and information for its clients.Petitioner's business was one of performing services; it was not a manufacturing business.The parties have entered into stipulations from which there is agreement upon the following facts:The partnership received commissions from nonrenegotiable business aggregating $ 56,478.53 which is attributable to the years 1943-1945.For each of the years 1943, 1944, and 1945, the partnership's expenses amounted to $ 14,000 per year, including the salary paid to Edell's wife, or $ 42,000 for the 3 years.28 T.C. 601">*616  The partnership received net income, after expenses, of $ 35,000, after 1945 which was for commissions attributable to services performed by1957 U.S. Tax Ct. LEXIS 162">*196  the partnership during the years 1943-1945, inclusive, for the eight corporations involved.Exclusive of commissions received by the partnership which are not subject to renegotiation, the net income, after expenses, of the partnership for, or attributable to, the 3 years 1943-1945, amounted to the total net sum of $ 300,000.  That is to say, the partnership received during the 3-year period from various ones of the eight corporations involved, commissions in the net amount of $ 300,000.The partnership received from various ones of the eight corporations involved in each of the years 1943-1945, the net amount set forth below, and these net amounts are involved in this case:YearNet receipts of partnership1943$ 56,0001944104,0001945140,000Total300,000The respondent now claims that of the total net profit of the partnership for each of the years 1943-1945, $ 20,000 for each year constituted reasonable compensation for the services rendered to its clients, and the following net profits were excessive: $ 36,000 for 1943; $ 84,000 for 1944; and $ 120,000 for 1945.The stipulated fact are found as stipulated; the stipulations of facts are incorporated herein1957 U.S. Tax Ct. LEXIS 162">*197  by this reference.Reasonable compensation for the partnership's services is $ 30,000 for 1943; $ 50,000 for 1944; and $ 70,000 for 1945.  Petitioner's profits for 1943, 1944, and 1945 were excessive to the extent of $ 26,000, $ 54,000, and $ 70,000, respectively.OPINION.The first issue presents the problem whether any of the Edell partnership's earnings for each of the 3 years, 1943-1945, inclusive, is subject to renegotiation under the provisions of section 403 (a) (5) (B) of the Renegotiation Act of 1942, as amended.  21957 U.S. Tax Ct. LEXIS 162">*199  If 28 T.C. 601">*617  that issue is decided in the affirmative, another question must be decided, the amount in each year of the partnership's excessive profits, if any, under the provisions of section 403 (a) (4) (A).  It is now well established that in a Tax Court proceeding for the redetermination of excessive profits the petitioner has the burden of proving that the respondent's determination is erroneous "with respect to any amount up to that originally determined as excessive, and that the respondent has the burden in respect to any additional amounts proposed for the first time in his answer." Nathan Cohen v. Secretary of War, 7 T.C. 1002, 1011;1957 U.S. Tax Ct. LEXIS 162">*198 Bass v. Stimson, 20 T.C. 428, 434. The questions to be decided under the first issue, relating to the contracts or arrangements made by the petitioner with various corporations, involve the provisions of section 403 (a) (5) (B).  The petitioner has the burden of proving that the respondent erred in its determination that section 403 (a) (5) (B) applies to all such contracts or arrangements.  Under the second issue, the respondent has the burden of proof in respect to an additional amount for 1943 which it claimed for the first time at the trial constituted excessive profits, namely, $ 10,265.  3 Otherwise, the petitioner has the burden of proving that the respondent's original determination of the amount of excessive profits for 1943, $ 25,735, is incorrect, and that the respondent's determinations of amounts of excessive profits for 1944 and 1945 are erroneous.  It is noted, further, that if the second issue is reached, the question must relate to each of the years 1943-1945, inclusive, separately, rather than to the 3-year period taken as a whole.Under subsection (c) (1) of section 403 of the Renegotiation Act of 1942, as amended, 41957 U.S. Tax Ct. LEXIS 162">*201  it is provided, in part, unless there is request by a contractor or subcontractor to the proper renegotiation authority (the 28 T.C. 601">*618  War Contracts Price Adjustment Board, in this case) the power to renegotiate shall be exercised "with respect to the aggregate of the amounts received or accrued during the fiscal year * * * by a contractor or subcontractor under contracts with the Departments and subcontracts." Section 403 (a) (8) defines fiscal year to mean the taxable year of the contractor or subcontractor1957 U.S. Tax Ct. LEXIS 162">*200  under chapter 1 of the Internal Revenue Code.  Petitioner's fiscal year, for purposes of the Renegotiation Act of 1942, as amended, is a calendar year.  Petitioner did not request the Board to exercise its powers separately with respect to amounts received under any one or more separate contracts so as, for example, to determine whether excessive profits were realized during the 3-year period, 1943-1945, inclusive. The Board exercised its powers with respect to the aggregate amounts received by petitioner in each of the years 1943-1945, inclusive, and issued three separate orders, one for each year.  This Court must, therefore, in this case, consider the question of whether petitioner realized any excessive profits on the basis of the aggregate amounts received by petitioner in each of the years 1943, 1944, and 1945.  Sec. 403 (e) (1).  5Issue 1.  This issue presents a question of fact as to whether Harry Edell solicited or procured Government contracts or subcontracts for each of eight corporations from which the Edell partnership received commissions during the years 1943-1945, inclusive. Respondent determined that the partnership's profits during each of those years are subject to renegotiation, and its argument in support of its determination is that the arrangements with each of the eight corporations, from which the partnership's profits were derived, constituted "subcontracts" as defined in section 403 (a) (5) (B).  Petitioner contends that none of the eight arrangements constituted "subcontracts" as so defined, and its principal argument in support of 1957 U.S. Tax Ct. LEXIS 162">*202  this contention is that it did not solicit or procure Government contracts or subcontracts for any of the eight corporations.In George M. Wolff et al. v. Macauley, 8 T.C. 146, and in Leon Fine, 9 T.C. 600, we held that the petitioners were not subcontractors merely because their compensation was based or computed upon the amount of Government contracts or subcontracts received by their principals, since the petitioners did not solicit or procure any of such Government contracts or subcontracts. In the Wolff case, we said (p. 152):the language of the statute aptly applies to manufacturers' agents and sales engineers who procure Government contracts for their principals and whose compensation is contingent upon the business they are able to obtain for the principals or fixed by the amount of such business.28 T.C. 601">*619  We quoted this language in the Fine case, at page 608.  In the instant case, petitioner was paid fixed percentages, varying from 2 1/2 per cent to 5 per cent of the amounts paid by the Government to each of its principals under Government contracts.  The Wolff and Fine cases make it1957 U.S. Tax Ct. LEXIS 162">*203  clear that this is not, in itself, enough to make the arrangements subcontracts under section 403 (a) (5) (B).  It is necessary, also, that the petitioner should have solicited or procured the Government contracts received by its principals.Petitioner argues that the services performed by the partnership are sufficiently similar to the services performed by the petitioners in the Wolff case and the petitioner in the Fine case, to require the same conclusion as we reached in those cases, namely, that the petitioner did not solicit or procure Government contracts, and that, therefore, it was not a subcontractor whose profits are subject to renegotiation.In French v. War Contracts Price Adjustment Board, 13 T.C. 276, we concluded that the services performed by French constituted soliciting or procuring Government contracts, and we therefore held that he was a subcontractor whose profits are subject to renegotiation. Respondent argues that the services performed by the petitioner are sufficiently similar to those performed by French (in the French case) to require the same conclusion.The facts have been set forth at length in our Findings1957 U.S. Tax Ct. LEXIS 162">*204  of Fact.  Nevertheless, we believe a brief summary of the facts will be useful.Petitioner had eight clients during the 3 years 1943-1945.  It had one contract, or arrangement, with each of its clients.  The parties have stipulated that the services performed by the petitioner for each of its eight clients and that the terms of the arrangement it had with each one were substantially the same.  The evidence is general and fragmentary; it does not show in detail as to each of the eight corporations the precise services which were performed by petitioner.  However, under the stipulation of the parties, if it is established that petitioner solicited or procured a Government contract for one of the eight corporations, it follows that we may find and conclude that it solicited or procured a Government contract for each of the eight corporations.The burden of proof is upon petitioner and if it has failed to show what it did for each of its eight clients, there is failure of proof.The record includes letter memoranda of four of the eight agreements which the petitioner had with its clients.  If the question were to be decided solely upon the basis of these letter memoranda of agreement, 1957 U.S. Tax Ct. LEXIS 162">*205  there would be considerable strength in petitioner's contentions.  The agreements which were entered into by Edell on behalf of the petitioner provided that Edell's duties would include carrying on various kinds of research, making analyses, obtaining 28 T.C. 601">*620  information, and serving in an advisory capacity.  The draftsman did not, in every instance, include a reference to Edell's obtaining Government contracts.  But the question in this case turns upon whether, in fact, each contract, or arrangement, of petitioner with a principal embodied an agreement that Edell would solicit, attempt to procure, or procure a contract, or contracts, with the Government for a principal.  Such agreements may have been oral.  Section 403 (a) (5) (B) is not limited to written contracts or arrangements.Decision of the issue in this case cannot be made to depend solely upon the terms of the few examples of letter memoranda agreements between petitioner and some of the corporations which have been placed in evidence by the petitioner.  If the issue were to be so limited, it would become an easy matter to avoid the intent of the Renegotiation Act by the simple device of writing agreements which contain1957 U.S. Tax Ct. LEXIS 162">*206  no specific provision coming within section 403 (a) (5) (B).  Congress did not intend to permit renegotiation to be so easily escaped.  Section 403 (a) (5) (B) (ii) is applicable to services "performed" as well as to services "to be performed." The question here is whether, in fact, Edell agreed to solicit and procure Government contracts for each of the eight corporations.From the entire record, it must be concluded that Edell agreed and was expected to solicit and procure Government contracts.  Before contracting with Edell, each of the eight companies desired to obtain Government contracts, but executives of the companies did not know how to proceed to obtain them.  This is shown both by the testimony of those executives of companies who were called as witnesses by petitioner, and by the testimony of Edell.  The inference is unavoidable that the main reason for the companies' engaging Edell was that they expected him to obtain Government contracts for them.  Furthermore, respondent introduced in evidence a file of copies of correspondence between Edell and the various clients of petitioner (Exhibit B) which comprises 290 letters.  All of this correspondence has been carefully 1957 U.S. Tax Ct. LEXIS 162">*207  examined and examples thereof have been included in the Findings of Fact.  These quotations from the correspondence involve each one of the eight clients which are involved.  They are fairly typical of much that is covered by the correspondence.  The quoted letters show clearly that Edell solicited and procured Government contracts for petitioner's clients.  Another example is as follows: Edell learned from the Government authorities at Wright Field that a contract for the manufacture of the "Knutson Vest" had been awarded to the Breslee Manufacturing Co.  On September 20, 1944, he wrote to Breslee soliciting a subcontract for Colonial to produce a component part of the Knutson Vest, a giant jackknife, and subsequently a subcontract was awarded by Breslee to Colonial Knife for production of the Jiant Jack Knife.28 T.C. 601">*621  As has been set forth in the Findings of Fact, the evidence shows clearly that Harry Edell, the principal member of the partnership, was authorized to and did represent each of the partnership's eight clients in dealings with various Government agencies, and that he performed the following services: Finding out and advising each of the eight companies about opportunities1957 U.S. Tax Ct. LEXIS 162">*208  for Government contracts so as to insure issuance to each of the companies of invitations to bid on Government contracts; assisting each of the companies to prepare and submit bids on Government contracts; negotiating the terms of Government contracts for each of the companies; and contacting Government procurement offices so as to stimulate their interest in the products of each of the companies.  These are substantially the same services which were performed by the petitioner in French v. War Contracts Price Adjustment Board, supra, where we held that the petitioner was a subcontractor. Upon the whole record, our conclusion is that petitioner solicited and procured Government contracts or subcontracts for each of the eight corporations.  The partnership undoubtedly rendered other services which were of value both to the Government and to its principals in servicing Government contracts after they were awarded to the principals, but since petitioner also solicited and procured these Government contracts for its principals, and since it agreed to do so, the contracts, or arrangements, under which it performed the services of soliciting and procuring1957 U.S. Tax Ct. LEXIS 162">*209  Government contracts were subcontracts within the meaning of section 403 (a) (5) (B) (ii).Petitioner argues, in effect, that in order for it to be a subcontractor within the meaning of section 403 (a) (5) (B), as that section has been construed in George M. Wolff et al. v. Macauley, supra, and Leon Fine, supra, it is necessary that it should have procured all of the Government business out of which it was paid a percentage.  Petitioner errs in this contention.  In order to constitute each of the eight arrangements as subcontracts, it is necessary only that petitioner should have procured some part of the Government business received by each of the eight corporations, of which it was paid a percentage.  This is the rule set forth in French v. War Contracts Price Adjustment Board, supra, at 280. In other words, if the Edell partnership procured at least one Government contract for each of the eight corporations, then all of the profits derived by the partnership from commissions on Government contracts received by each of the eight corporations is subject to renegotiation, even 1957 U.S. Tax Ct. LEXIS 162">*210  if part of such commissions was paid on Government contracts which the partnership did not procure.Petitioner had the burden of proof; it was obliged to establish that, with respect to each arrangement with a client, it did not solicit or 28 T.C. 601">*622  procure any Government contracts.  This, petitioner has failed to do.  On the contrary, the evidence shows affirmatively that petitioner did solicit and procure some Government contracts or subcontracts for each of the partnership's eight clients.The Wolff and Fine cases, relied upon by petitioner, are readily distinguishable.  In neither of those cases did the petitioners solicit or procure any Government contracts or subcontracts for their principals; their compensation was based or contingent upon the amount of the Government contracts or subcontracts procured by their principals, and not by them.  In the instant case, the Edell partnership's compensation was based, or was contingent, at least in part, upon the amount of Government contracts or subcontracts procured by the partnership for each of its principals.In the Wolff case, the petitioners were architects, and their duties were to prepare drawings of installations1957 U.S. Tax Ct. LEXIS 162">*211  to be built for the Kaiser Co., and to issue invitations to bid on contracts for construction of such installations.  In the Fine case, the petitioner's duties were to obtain and correlate technical information from airplane manufacturers to which the Raymond De-Icer Co. sold de-icing equipment, and to coordinate production schedules.  The services performed by Edell were in no way similar; he clearly solicited and procured Government contracts or subcontracts.Petitioner argues, also, that since it did not become entitled to any compensation until after one of the eight corporations had successfully completed a Government contract and had been paid by the Government, its compensation was not computed or contingent upon the amount of Government contracts it obtained for its principals.  We are unable to follow petitioner's reasoning.  Before Government contracts were successfully completed by the eight corporations and the corporations were paid by the Government, petitioner first procured the Government contracts, and it was ultimately paid a percentage of such Government contracts.  Therefore, the amount of the partnership's compensation was, in the first instance, contingent1957 U.S. Tax Ct. LEXIS 162">*212  upon its obtaining Government contracts for its principals, and it is immaterial that it had to wait for actual payment of its compensation until after the Government contract had been successfully completed and the principal paid by the Government, or even that its compensation might also be secondarily contingent upon such successful completion and payment.Under arrangements between petitioner and each of eight corporations, the compensation received by petitioner was contingent or computed, at least in part, upon the amount of Government contracts which petitioner procured for each of the eight corporations, during the years 1943-1945, inclusive. It follows that petitioner was a subcontractor 28 T.C. 601">*623  within the meaning of section 403 (a) (5) (B) (i), and that in each year it received income which is subject to renegotiation.Issue 2.  The next question is what amount, if any, of the profits derived by petitioner under the arrangements was excessive. The parties have stipulated that these net profits, before any allowance by the respondent of a reasonable amount for each year, amounted to $ 56,000, $ 104,000, and $ 140,000 for 1943, 1944, and 1945, respectively.  Respondent1957 U.S. Tax Ct. LEXIS 162">*213  contends that for each year $ 20,000 represents a reasonable profit.  Petitioner claims that no part of its net profits for any year was excessive.In their stipulation as to the amount of net profits derived from renegotiable business in each of the years 1943-1945, inclusive, the parties have allocated a net amount received in 1946 to the years involved, under section 403 (h).  6 Cf.  Rosner v. W. C. P. A. B., 17 T.C. 445, 458-461.1957 U.S. Tax Ct. LEXIS 162">*214  There is no question to be decided relating to the allowance of a reasonable amount for the expenses of the partnership in each year.  Respondent has allowed $ 14,000 for each year, and this allowance has been accepted by petitioner.  Cf.  Greaves v. War Contracts Price Adjustment Board, 10 T.C. 886, 891-893.Petitioner contends that the amount of $ 300,000, the total amount of net profits for the 3 years involved, does not constitute excessive profits. In effect, petitioner asks the Court to consider the question under this issue as one which involves a determination of the total amount of excessive profits for 3 years considered together, rather than a determination of the amount of excessive profits for each of 3 years.  At the outset, therefore, it is necessary to point out that the question must be considered with respect to each year, rather than with respect to one period of 3 years, under section 403 (c) (1).In support of its contention that no part of its profits for any of the years involved was excessive, petitioner argues that the risks incurred and the capital used in its business were large because it had to defray its own expenses1957 U.S. Tax Ct. LEXIS 162">*215  and it was not paid until after one of its clients had made delivery to the Government and had been paid by the Government; that the character of the services rendered by the 28 T.C. 601">*624  partners, as well as the time and effort expended by them, requires a high rate of compensation; and that the partnership should be credited with time and effort expended by Harry Edell in 1942 and in 1946, in work affecting the earnings of the partnership in 1943, 1944, and 1945, the years here involved.Respondent, in support of its contention that all of the profits which exceed $ 20,000 per year are excessive, argues that petitioner acted simply as a conveyor of information from Government agencies to each of its eight clients.Section 403 (a) (4) (A) 7 lists the factors to be taken into consideration in determining excessive profits. Since petitioner was not a manufacturer, some of the factors listed in section 403 (a) (4) (A) obviously are not relevant.  Consideration has been given to the factors which are applicable to petitioner's business.1957 U.S. Tax Ct. LEXIS 162">*216  We do not think that petitioner incurred any substantial risks in its business.  Although petitioner had to wait for its compensation until after the Government had paid its client, in the case of each Government contract it solicited or procured, the record establishes that the partnership enjoyed a high degree of certainty that it would ultimately receive commissions sufficient to cover all of its expenses and provide adequate compensation for the time of the partners, as well as a substantial profit.The only capital which was used in petitioner's business is the amount of $ 5,000 loaned to the partnership by Lewis Edell.  Petitioner has not offered any evidence to show that any other capital was used in the business.  The partnership agreement provided for prompt repayment of this $ 5,000 to Lewis, as well as for division of all partnership profits.  Petitioner has not shown that any partnership profits were retained in the business and used as capital.  However, it is clear that some small capital was necessary to the conduct 28 T.C. 601">*625  of petitioner's business, and our determination of the amount of excessive profits in each year includes an allowance for a reasonable return 1957 U.S. Tax Ct. LEXIS 162">*217  on such capital as is estimated to have been used in the business in each year.The principal element in our determination of the amount of profits in each year which was not excessive, is the value of the personal services rendered by the partners. This includes primarily the services of Harry Edell.  Lewis Edell performed only negligible services for the partnership. He was employed full time, during the years involved, as a sales agent for several sportswear manufacturers, and he devoted little time to the work of the partnership. On the other hand, Harry Edell devoted long hours each day to the work of the partnership, he worked on weekends, and he never took a vacation during the years involved.Petitioner introduced the testimony of two management consultants, as expert witnesses, upon the value of the services performed by the Edell partnership. We have considered this testimony.  We have considered, also, the fact that part of the profits of petitioner during 1943-1945, inclusive, was the result of work done by Harry Edell in 1942.  Cf.  Armstrong v. War Contracts Price Adjustment Board, 15 T.C. 625, 636-637, affirmed per curiam 194 F.2d 875,1957 U.S. Tax Ct. LEXIS 162">*218  certiorari denied 343 U.S. 967">343 U.S. 967.Although the services performed by Edell were not of a technical nature, and very little, if any, knowledge of engineering was required in their performance, the record establishes that the services performed had substantial value to the Government and to each of the partnership's eight clients.  Executives of each of the eight companies lacked the ability to convert to war production and to fulfill Government requirements without the kind of assistance provided by Edell.  By ascertaining what products each of the companies could produce for the Government with their existing plants and equipment, by obtaining technical and cost information for them, and by locating sources of supplies and machinery they required, Edell aided each of the companies to convert to war production, and to produce many goods necessary to the war effort.  Thus, he made some contribution to the war effort.Upon the whole record, we think that the amounts which the respondent determined to be excessive profits for each year, are too high.  After a careful consideration of all of the evidence, it is found and concluded that the petitioner derived excessive1957 U.S. Tax Ct. LEXIS 162">*219  profits from renegotiable income in the amounts of $ 26,000, $ 54,000, and $ 70,000 for the years 1943, 1944, and 1945, respectively.An order will be issued in accordance herewith.  Footnotes1. Exhibit D, attached to the petition, lists the corporations from which the partnership received payments in each of the years 1943-1945, inclusive. The partnership was unable to produce its books and records during the trial of this case.  Harry Edell testified about many matters from memory.  Therefore the record is not exact about some details such as all of the years in which payments were received.↩2. SEC. 403 (a). For the purpose of this section --* * * *(5) The term "subcontract" means -- (A) Any purchase order or agreement to perform all or any part of the work, or to make or furnish any article, required for the performance of any other contract or subcontract, but such term does not include any purchase order or agreement to furnish office supplies; or(B) Any contract or arrangement other than a contract or arrangement between two contracting parties, one of which parties is found by the Board to be a bona fide executive officer, partner, or full-time employee of the other contracting party, (i) any amount payable under which is contingent upon the procurement of a contract or contracts with a Department or of a subcontract or subcontracts, or determined with reference to the amount of such a contract or subcontract or such contracts or subcontracts, or (ii) under which any part of the services performed or to be performed consists of the soliciting, attempting to procure, or procuring a contract or contracts with a Department or a subcontract or subcontracts: Provided, That nothing in this sentence shall be construed (1) to affect in any way the validity or construction of provisions in any contract with a Department or any subcontract, heretofore at any time or hereafter made, prohibiting the payment of contingent fees or commissions; or (2) to restrict in any way the authority of the Secretary or the Board to determine the nature or amount of selling expenses under subcontracts as defined in this subparagraph, as a proper element of the contract price or as a reimbursable item of cost, under a contract with a Department or a subcontract.↩3. The respondent's original determination was that petitioner realized excessive profits for 1943, 1944, and 1945, in the amounts of $ 25,735, $ 85,541, and $ 170,377, respectively.  Respondent, at the trial, made the claim that excessive profits were realized for 1943 in the amount of $ 36,000.  Under a stipulation, respondent has receded somewhat from its original determination in respect to 1944 and 1945 in that it now claims that in those years profits were excessive in the amounts of $ 84,000 and $ 120,000.↩4. (c) (1) * * * The Board shall exercise its powers with respect to the aggregate of the amounts received or accrued during the fiscal year (or such other period as may be fixed by mutual agreement) by a contractor or subcontractor under contracts with the Departments and subcontracts, and not separately with respect to amounts received or accrued under separate contracts with the Departments or subcontracts, except that the Board may exercise such powers separately with respect to amounts received or accrued by the contractor or subcontractor under any one or more separate contracts with the Departments or subcontracts at the request of the contractor or subcontractor. * * *↩5. (e) (1) Any contactor or subcontractor aggrieved by an order of the Board determining the amount of excessive profits received or accrued by such contractor or subcontractor may, within ninety days * * * after the mailing of the notice of such order under subsection (c) (1), file a petition with The Tax Court of the United States for a redetermination thereof. * * *↩6. SEC. 403 (h).  This section shall apply only with respect to profits derived from contracts with the Departments and subcontracts which are determined under regulations prescribed by the Board to be reasonably allocable to performance prior to the close of the termination date.  Notwithstanding the method of accounting employed by the contractor in keeping his books, profits determined to be so allocable shall be considered as having been received or accrued not later than the termination date.  For the purposes of this subsection, the term "termination date" means whichever of the following date first occurs --(1) December 31, 1945; or(2) the date proclaimed by the President as the date of termination of hostilities in the present war; or(3) the date specified in a concurrent resolution of the two Houses of Congress as the date of the termination of hostilities in the present war.↩7. Sec. 403. (a) For the purposes of this section --* * * *(4) (A) The term "excessive profits" means the portion of the profits derived from contracts with the Departments and subcontracts which is determined in accordance with this section to be excessive. In determining excessive profits there shall be taken into consideration the following factors: (i) efficiency of contractor, with particular regard to attainment of quantity and quality production, reduction of costs, and economy in the use of materials, facilities, and manpower;(ii) reasonableness of costs and profits, with particular regard to volume of production, normal prewar earnings, and comparison of war and peacetime products;(iii) amount and source of public and private capital employed and net worth;(iv) extent of risk assumed, including the risk incident to reasonable pricing policies;(v) nature and extent of contribution to the war effort, including inventive and developmental contribution and cooperation with the Government and other contractors in supplying technical assistance;(vi) character of business, including complexity of manufacturing technique, character and extent of subcontracting, and rate of turnover;(vii) such other factors the consideration of which the public interest and fair and equitable dealing may require, which factors shall be published in the regulations of the Board from time to time as adopted.↩