Court Opinion

ID: 4607343
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:40:24.525229+00
Date Added: 2024-06-11T07:53:31.714324
License: Public Domain

ROSLYN FUEL CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Roslyn Fuel Co. v. CommissionerDocket Nos. 9074, 22072.United States Board of Tax Appeals16 B.T.A. 285; 1929 BTA LEXIS 2605; April 30, 1929, Promulgated *2605  1.  Assessment and collection of asserted deficiencies in tax for the fiscal years ended June 30, 1917, and June 30, 1918, and for the six months ended December 31, 1918 held barred by statute of limitation.  2.  Held that the Board has jurisdiction to determine the true tax liability of petitioner for each of those periods, in so far as the pleadings and proof raise the question.  3.  Held that petitioner, in 1906, acquired coal properties for cash instead of stock.  4.  Such coal properties determined to have had a value at the time acquired substantially in excess of the cost.  5.  Held that, since the coal properties were a substantial incomeproducing factor in petitioner's business, the exclusion of the excess of the value of the properties over the amount includable in invested capital gives rise to an abnormality entitling petitioner to special assessment for the taxable year ended June 30, 1918, for the period July 1, 1918, to December 31, 1918, and for the calendar year 1920.  6.  Held that petitioner is not entitled to special assessment for the taxable year ended June 30, 1917.  7.  Use of a tentative tax in determining the amount of earnings*2606  available for distribution as dividends held erroneous.  L. S. Ayers & Co.,1 B.T.A. 1135">1 B.T.A. 1135 followed.  J. S. Y. Ivins, Esq., and F. E. Youngman, Esq., for the petitioner.  Orris Bennett, Esq., and Hartford Allen, Esq., for the respondent.  SIEFKIN*286  These are proceedings under Dockets Nos. 9074 and 22072, duly consolidated for hearing and decision, for the redetermination of deficiencies in income and profits taxes for the fiscal years ended June 30, 1917, and June 30, 1918, the taxable period of six months ended December 31, 1918, and the calendar year 1920, in the respective amounts of $4,058.62, $1,459.98, $3,887.06, and $643.53.  It is alleged under Docket No. 9074 that the respondent erred: (1) In not taking into account as paid-in surplus, for the purpose of computing statutory invested capital, the value of the coal lands acquired by the company from the principal stockholder, definitely known or accurately ascertainable as of the date of acquisition, of approximately $1,200,000 in excess of the cash or other consideration paid therefor; (2) In reducing invested capital for the fiscal year 1917 in the*2607  amount of $9,328.01, and for the fiscal year 1918, $11,300.99, as a result of taking into account a so-called tentative tax for the purpose of determining the amount of earnings available for distribution as dividends during the said taxable years; (3) In rejecting the application of the taxpayer-petitioner for the determination of the profits tax imposed by the Revenue Act of 1917 under the provisions of section 210, on the ground that only a minimum, and not the correct statutory invested capital, can be satisfactorily determined; (4) In rejecting the application of the taxpayer-petitioner under the provisions of section 327 of the Revenue Act of 1918 for the *287  determination of the tax in accordance with the provisions of section 328 of the said Act, the profits tax as determined by the Commissioner (without the benefit of the said section) not being high merely because the taxpayer-petitioner earned within the taxable year a high rate of profit upon a normal invested capital, nor did 50 per centum or more of the gross income of the taxpayer-petitioner for the taxable year (computed under section 233 of Title II of the Act of 1918) consist of gains, profits, commissions, *2608  or other income, derived on a cost-plus basis from a Government contract or contracts made between April 6, 1917, and November 11, 1918, both dates inclusive, and (5) In the conclusion of law that the filing of amended returns had the force and effect of a waiver of the statutory period of limitation under the provisions of section 277(a)(2) of the Revenue Act of 1924 within which assessments may be made of income, excess-profits and war-profits taxes imposed by the Revenue Act of 1916, the Revenue Act of 1917, the Revenue Act of 1918, and by any such Act as amended.  By an amendment to the petition under Docket No. 9074, the petitioner requests this Board to find that the petitioner has overpaid its income and profits taxes for the fiscal years ended June 30, 1918, and June 30, 1919, and for the taxable period July 1, 1918, to December 31, 1918, and to determine the amounts of such overpayments.  Under Docket No. 22072, which refers only to the calendar year 1920, it is alleged that the respondent erred: (1) In excluding or failing to take into account as paid-in surplus, includable in statutory invested capital, the fair value of coal lands acquired by the petitioner from*2609  its stockholders without substantial change of beneficial interest, definitely known as of the date of acquisition, of not less than $950,000 in excess of the par value of the shares of stock issued or the cash or other considerations paid therefor; (2) In reducing statutory invested capital with respect to the amount of income, war-profits and excess-profits taxes for the fiscal year ended June 30, 1917; the fiscal year ended June 30, 1918; the taxable period of six months ended December 31, 1918; and the calendar year 1919, subject to averaging as provided by statute, in excess of the said taxes properly assessable and payable for the said taxable years, and (3) In rejecting the application of the petitioner under the provisions of section 327 of the Revenue Act of 1918 for the determination of the excess-profits tax under the provisions of, and by reference to the representative corporations specified in section 328 of the said Act.  *288  In Docket No. 22072 the petitioner requests that the Board find and determine that the petitioner is entitled to a refund for the year 1920.  The hearing of the proceeding was limited to the issues defined in subdivisions (a) and*2610  (b) of Rule 62.  FINDINGS OF FACT.  The petitioner is a corporation organized on June 23, 1906, under the laws of the State of Washington, with its office and principal place of business in Seattle.  Prior to 1904 the Northern Pacific Railroad Co. practically held a monopoly of the coal industry in the eastern part of the State of Washington through its ownership of almost the entire Roslyn coal fields and control of transportation facilities.  There were no other producing coal fields in the eastern part of the State at that time.  The Roslyn field was discovered by Archibald S. Patrick in June, 1886.  Prior to 1904 there were only a few outlying tracts bordering on the Roslyn field owned by individuals.  One such tract was section 12 of township 20 north, range 14, east of the Williamette meridian.  The Northern Pacific Railroad was then mining coal from the Big Dirty seam and the Roslyn seam.  The coal in the Big Dirty seam, which was the overlying seam, was of a quality inferior to that in the Roslyn seam and had certain characteristics throughout the field by which mining men could readily recognize it.  The coal in the Roslyn seam could also be readily recognized.  Wherever*2611  the Big Dirty seam was found engineers who were familiar with the field knew that underlying it was the Roslyn seam.  Prior to 1904 Archibald S. Patrick and William McKay had acquired section 6 adjoining section 12 of the northeast quarter and had opened up a small mine on the Roslyn seam of coal about 1905.  These two individuals later organized the Roslyn-Cascade Coal Co., which has since that date operated on land adjoining that of the petitioner.  About 1905 George H. Brown, who, together with the widow Brown, owned the southeast quarter of section 12, as joint tenants, had opened up a small coal mine in the northwest quarter of the southeast quarter on what he thought was the Roslyn vein.  Archibald S. Patrick discovered that the Brown mine was not on the Roslyn seam, but on the Big Dirty seam, which was underlaid by the Roslyn seam.  Patrick and his associates promptly purchased the undivided one-half interest of the widown Brown and also tried to purchase the interest of George H. Brown but he, for personal reasons, refused to deal with them.  At that time Patrick also knew that another tract of 160 acres in section 12 owned by Joell Linn was also *289  underlaid with*2612  both seams of coal, but he did not purchase this property because it alone did not seem to him large enough to justify the necessary expense of opening and operating the mine.  During 1905 and the early part of 1906, Clarence R. Claghorn, general manager of the Northwest Improvement Co., which was the coal department of the Northern Pacific Railroad Co., was investigating possible new coal properties to be acquired by his company.  He personally inspected the Brown mine and found it to be on the Big Dirty seam and knew it was underlaid by the Roslyn seam.  He obtained an option from Brown, which he took to Howard Elliott, president of the Northern Pacific Railroad Co.  Elliott thought it inadvisable to take an undivided interest in a small piece of property which might lead to litigation.  He also thought it better to let private interests have a little of the Roslyn coal.  Claghorn then obtained permission from Elliott to transfer the option to his friend, Walter Oakes, who was also friendly to the interests of the Northern Pacific Railroad Co.  Claghorn did turn over the option to Oakes who, on April 4, 1906, purchased from George H. Brown and Laura Brown, his wife, their undivided*2613  half interest in the southeast quarter of section 12 for the sum of $10,000.  Sam Hill and Hervey Lindley were also interested in mining properties, but their agent delayed too long in attempting to acquire the Brown property and the result was that Oakes obtained it before their agent acted.  These two men then joined Walter Oakes in his venture.  On April 17, 1906, Hervey Lindley paid to Walter Oakes, in behalf of himself and Sam Hill, $6,000, which was to constitute part payment of their interest in the coal properties being acquired by Oakes.  Lindley and Hill were together to have an interest in the property equal to the interest taken by Oakes.  On April 25, 1906, Walter Oakes acquired from Joell Linn an additional 160 acres of coal land in section 12, for which he paid $16,000.  Only a part of this land was underlaid by the Big Dirty coal seam but was practically all underlaid by the Roslyn coal seam.  On April 26, 1906, Hervey Lindley paid to Walter Oakes, on behalf of himself and Sam Hill, $3,800, the balance of their contribution to the coal lands already acquired or to be acquired.  The total cost of the Brown and Linn tracts to the purchasers, including expenses, *2614  was $26,235.27.  The petitioner was incorporated June 22, 1906, with authorized capital stock of $50,000 which was subscribed for by Walter Oakes (311 1/2 shares), Hervey Lindley (187 1/2 shares), and A. F. Bunch, attorney (1 share).  Walter Oakes took 150 shares of the 311 1/2 shares shown above as trustee.  He ordered that 25 of these shares be issued in the name of George Brown.  *290  On June 30, 1906, George Brown paid Walter Oakes $1,400 for a 5 per cent interest in the "coal pool." A record book of petitioner, marked "check book" shows that on July 14, 1906, there was deposited to the credit of petitioner an amount of $26,235.27.  This same book, by entry dated July 13, 1906, shows that a check payable to "yourselves," in the amount of $26,235.27, was issued by petitioner for the Brown and Linn properties.  This book shows that on June 30, 1906, Walter Oakes paid to the petitioner $1,000 by his personal check which is reflected on the books of the petitioner as received on that date as payment on the stock subscription.  On July 13, 1906, two other payments for stock were made in the respective amounts of $700 and $64.73.  Walter Oakes made the $64.73 payment by*2615  his own check but there is nothing to show the source of the $700 payment.  The general journal and ledger of the petitioner shows that $28,000 was paid for 56 per cent stock assessment as follows: June 30, 1906$1,000.00July 13, 1906764.73July 14, 190626,235.27Total28,000.00On July 14, 1906, the Brown and Linn properties were transferred to the petitioner by Walter Oakes.  Stock was issued to Oakes and the other subscribers on the same day.  The petitioner took the property into its books at actual cost to the transferors.  On September 15, 1906, the petitioner acquired from C. P. Brosius the fee title to a small portion and mineral rights in the whole of an additional 160 acres adjoining land in section 12, and later acquired fee title to the entire 160 acres.  On November 12, 1908, the petitioner acquired an additional 40 acres of land in section 12 from Henry Cottle.  The Brown tract was divided June 22, 1907, by mutual deeds conveying the west half to the petitioner and the east half to the Roslyn-Cascade Coal Co.  The Roslyn-Cascade Coal Co. was organized in about 1905 or 1906 and shipped its first car of coal from the Roslyn field in 1908. *2616  The Northern Pacific Railroad Co. owned approximately 5,000 acres of Roslyn coal adjoining the petitioner's property on the south and east.  The Northern Pacific Railroad Co. withdrew from the commercial coal business in about 1907 or 1908.  This business of the railroad amounted to about 200,000 to 300,000 tons of coal per year.  In 1906 it was generally understood by the officials of the railroad company that the railroad would go out of the commercial coal business within two years.  *291  At the date of acquisition of the Brown and Linn tracts by the petitioner the location and extent of the Big Dirty and the Roslyn seams of coal in section 12 were known to coal-mining experts.  At the date of acquisition of the Brown and Linn tracts by the petitioner the quality and quantity of coal in the Big Dirty and Roslyn seams underlying it were known to the incorporators and others, or could have been readily and accurately ascertained from data then available.  Coal from the Roslyn field found a ready commercial market in the eastern part of the State of Washington, where there was little competition from outside or more distant mines, and where there was an advantage in freight*2617  rates to those markets of at least 50 cents per ton.  In 1906 the Roslyn and Big Dirty seams each averaged about 5 feet in thickness.  The coal averaged about 1,000 tons per acre per foot of thickness.  Each seam contained about 5,000 tons per acre.  About 80 to 85 per cent of this was recoverable.  The petitioner began its mining operations on the Roslyn seam of coal in 1908.  The records of petitioner show that 877,411 tons of coal were extracted prior to March 1, 1913.  Of this amount, 19,320 tons were taken from the Cottle tract and 132,536 tons from the Brosius tract prior to March 1, 1913, leaving a total of $725,555 tons extracted from the Brown and Linn properties prior to March 1, 1913.  A total of 1,794,328 tons had been extracted from all its property by the close of 1919.  A total of 402,808 tons of Roslyn coal was removed from the Cottle and Brosius tracts, leaving a net production of 1,391,520 tons of Roslyn seam coal from the Brown and Linn tracts.  Mine No. 2 on the Big Dirty seam was opened in 1911, and 80,630 tons of coal were mined prior to March 1, 1913, most of which was taken from the Brown and Linn properties.  A total of $894,271 tons was extracted from*2618  the Big Dirty seam, of which 33,600 tons were taken from the Brosius tract.  The remaining 860,671 tons were mined from the Linn and Brown properties.  By July, 1927, there had been taken from Mine No. 3 a total of 780,730 tons of coal from another seam known as No. 6 seam.  Of this amount, 139,147 tons were mined from the Brosius tract.  This mine was not opened until 1918.  A letter dated September 14, 1928, from the collector of internal revenue at Tacoma, Wash., to petitioner contained the following statements: We note from your letter of September 11, 1928, and from our files on the case, that our letter of September 10, 1928, did not give you the information requested relative to the years 1919, 1920 and 1921.  This information was inadvertently omitted from our certificate and we regret any inconvenience which may have been caused by such omission.  *292  A correct certificate covering the fiscal years ended June 30, 1916, June 30, 1917, June 30, 1918, the last six months of 1918 and the calendar years 1919, 1920 and 1921 is transmitted herewith.  IN RE: ROSLYN FUEL COMPANY(1) Dates of filing original income and profits tax returns for period 7-1-1915, to*2619  12-31-1921, inclusive, with dates of assessment.  FiledAssessedFiscal year period or calendar year ended - June 30, 19168-23-19169-22-1916June 30, 19178-29-19179-21-1917June 30, 1917Excess profits tax, Act of Mar. 3, 19179-17-191710-26-1917June 30, 1917Supplemental Return Act of Oct. 3, 19173-28-19186- 6-1918June 30, 19189-28-191811- 4-1918June 30, 1918Tentative3-15-1919Supplemental Return Act of 1918Definitive6-14-19198- 1-1919Tentative3-15-1919Period 7-1 to 12-31-1918Definitive6-14-19198- 1-1919Tentative3-11-1920Calendar year 1919Definitive5-14-19208- 4-1920Tentative3- 8-1921Calendar year 1920Definitive5-14-19217- 2-1921Tentative3-13-1922Nontaxable.Calendar year 1921Definitive6-15-1922No assessment.(2) Taxes assessed and paid 7-1-1915 to 12-31-1922: PeriodTax assessedTax paidDate6-30-1916$1,205.78$1,205.7810- 7-1916602.89602.8912- 9-19166-30-19174,544.814,544.8110-16-19177,693.627,693.6212-10-191733,301.2533,301.256-12-19185,379.46None paid6-30-191893,357.3493,357.3412-12-1918760.02760.023-15-191911,995.58None paidPeriod 7-1 to 12-31-191834,507.4311,000.003-15-19194,239.983-15-19192,013.746-16-19198,626.869-11-19198,626.8512- 6-191949,891.25None paid12-31-191924,883.617,063.003-11-19207,063.006- 9-19204,536.719-10-19206,220.9012- 6-192012-31-192035,717.3111,100.003-15-19216,758.667- 6-19218,929.359- 9-192112-31-1921NoneNoneNoneTotals303,840.35227,644.76*2620  (3) Certificates of Overassessment: PeriodAllowanceAbatedCreditedRefunded6-30-1917$17,392.02$5,379.46$8,929.30$3,083.266-30-191864,406.4261,886.832,519.5912-31-19182,830.252,830.2584,628.6967,266.298,929.308,433.10*293  This office is unable to give you the dates on which the refunds were made.  The allowances were adjusted by this office on Mar. 28, 1924, the refunds were made some 60 days thereafter.  (4) Claims: PeriodDate filedAmount of claim7-1-1916 to 12-31-1920, inc6-15-1922$53,091.116-30-19171-22-19205,379.466-30-19181-22-192048,891.256-30-19181-22-19204,239.9812-31-192012-15-19218,929.30Total assessments303,840.35Total allowances$84,628.69Less refund8,433.10Net overassessment credited to list76,195.59Total payments227,644.76Total payments303,840.35Total tax paid227,644.76Total tax refunded8,433.10Net payments 7-1-1915 to 12-31-1922219,211.66This is to certify that the above statement was compiled by this office and that the same correctly shows the dates of*2621  filing income tax returns, dates and amounts of taxes assessed and taxes paid for the same periods; amounts of refunds; dates of filing claims for refund for the period 7-1-1915 to 12-31-1921, inclusive, by the Roslyn Fuel Company.  A. J. SWINDLE, ASST. TO COLL. (COL. OF INTERNAL REV.) In preparing its income and profits-tax return for the years in question the petitioner did not include in its invested capital, as paid-in surplus, any value for property acquired July 14, 1906, in excess of the cost thereof to the stockholders of petitioner.  In auditing the petitioner's income and profits-tax returns for those years the respondent made no allowance for any excess value.  The petitioner's income-tax return for the fiscal year ended June 30, 1917, in setting forth the March 1, 1913, value of its coal lands, contained the following statement: "Coal land as revalued January 1, 1909, $269,528.07." In determining the amount of invested capital for the fiscal years ended June 30, 1917, and June 30, 1918, the respondent set up a *294  tentative tax in determining the amount of earnings available for distribution as dividends.  The notice of deficiency, dated September 17, 1925, states*2622  in part: The five-year period provided in Section 277(a)(2) of the Revenue Act of 1924, within which assessment of tax for 1917 may be made has expired; however, Section 278(c) provides that where both the Commissioner and the taxpayer have consented in writing to the assessment of the tax after the time prescribed in Section 277(a)(2) the tax may be assessed at any time prior to the expiration of the period agreed upon.  If you agree to the assessment of the tax it will be necessary for you to sign and return to this office the enclosed form of waiver.  On March 21, 1925, the respondent wrote petitioner a letter which provided in part as follows: Reference is made to your income and excess-profits tax return for the fiscal year ended June 30, 1917, to your income and profits tax returns for the fiscal year ended June 30, 1918, and for the period July 1, 1918 to December 31, 1918, and to your application dated May 12, 1924, for assessment of your profits tax as prescribed by Section 210 of the Revenue Act of 1917 and Section 328 of the Revenue Act of 1918.  You were advised by Bureau letter dated August 18, 1924, of an additional tax liability in the amount of $9,405.66 for*2623  the years in question.  The audit of your returns is now complete and the additional tax liability affirmed, but the limitation period provided in Section 277(a)(2) of the Revenue Act of 1924 within which assessments of tax for 1918 may be made has expired.  However, Section 278(c) provides that where both the Commissioner and the taxpayer have consented in writing to the assessment of the tax after the time prescribed in Section 277(a)(2), the tax may be assessed at any time prior to the expiration of the period agreed upon.  Therefore, if you agree to the assessment of the tax it will be necessary for you to sign and return to this office within thirty days from the date of this letter the enclosed waiver forms.  In size of holdings and type of operations, the Roslyn-Cascade Coal Co. was similar to the petitioner in the years in question.  The Northwest Improvement Co. was not similar, since it had larger holdings and it mined for railroad purposes.  The Roslyn-Cascade Co. struck the same seams petitioner struck.  Their properties lay in the same field, and each company sold in the same market.  OPINION.  SIEFKIN: Under Docket No. 9074 the petitioner contends that assessment*2624  and collection of the deficiencies for the fiscal years ended June 30, 1917, and June 30, 1918, and for the taxable period of six months ended December 31, 1918, are barred by the statute of limitations.  Section 277(a)(3) of the Revenue Act of 1926 provides: The amount of income, excess-profits, and war-profits taxes imposed by the Act entitled "An Act to provide revenue, equalize duties, and encourage the industries of the United States, and for other purposes," approved August 5, *295  1909, the Act entitled "An Act to reduce tariff duties and to provide revenue for the Government and for other purposes," approved October 3, 1913, the Revenue Act of 1916, the Revenue Act of 1917, the Revenue Act of 1918, and by any such Act as amended, shall be assessed within five years after the return was filed, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period.  Returns for each of the years in question up to and including the taxable period ended December 31, 1918, were filed on or before June 14, 1919.  In the absence of waivers the time within which taxes could be assessed and collected would expire*2625  five years after that date, or June 14, 1924.  By letter of September 17, 1925, the respondent informed petitioner of the determination of deficiencies as follows: Fiscal year ended June 30, 1917$4,058.62Fiscal year ended June 30, 19181,459.98Taxable period July 1, 1918, to Dec. 31, 19183,887.06Total9,405.66There is no evidence that any consents in writing for later determination and assessments of the taxes for the taxable periods listed above were ever entered into and we must, therefore, hold that assessment and collection of the deficiencies asserted are barred by the statute of limitations.  By an amendment to the petition under Docket No. 9074, the petitioner requested that we find that the petitioner has overpaid its income and profits taxes for the fiscal years ended June 30, 1917, June 30, 1918, and for the taxable period, July 1, 1918, to December 31, 1918, and to determine the amounts of such overpayments.  Section 284(e) of the Revenue Act of 1926 provides: If the Board finds that there is no deficiency and further finds that the taxpayer has made an overpayment of tax in respect of the taxable year in respect of which the Commissioner*2626  determined the deficiency, the Board shall have jurisdiction to determine the amount of such overpayment, and such amount shall, when the decision of the Board has become final, be credited or refunded to the taxpayer as provided in subdivision (a).  Such refund or credit shall be made either (1) if claim therefor was filed within the period of limitation provided for in subdivision (b) or (g), or (2) if the petition was filed with the Board within four years after the tax was paid, or, in the case of a tax imposed by this Act, within three years after the tax was paid.  In , affd., , the respondent determined a deficiency for 1917 and the petitioner assigned as errors in the appeal not only that the deficiency was barred, but also that an additional tax which had been paid prior to this time was barred from collection at the time it was collected.  We held that the deficiency for 1917 was barred from collection and furthermore took jurisdiction of the other issue and found that this collection was barred at the time made.  *296  In *2627 , the question raised was whether the Board has jurisdiction to pass on the plea of the statute of limitations which was made in respect to a part of the tax which was shown and assessed on the original return but which had not been paid.  In that case the jurisdiction of the Board in the first instance was derived from the assertion of a deficiency by the respondent.  In that case we said: The Commissioner's determination of the deficiency in question conferred jurisdiction on the Board; the issue with respect to the statute of limitations on account of the unpaid portion of the original tax was timely raised in the petition, and its determination is a necessary incident to an ultimate finding by the Board as to the petitioner's true tax liability.  The Board is accordingly of the opinion that it has jurisdiction of the issue here presented as to the running of the statute of limitations with respect to the unpaid portion of the tax assessed on the original return.  As to this question, the case was affirmed by the *2628 . Likewise, in the instant proceeding, since we have jurisdiction of each of the taxable periods referred to in the petitions by virtue of determinations of deficiencies by the respondent, we have jurisdiction to determine the true tax liability of the petitioner for each of those periods, in so far as it is properly presented to us in the pleadings and evidence.  The petitioner contends that the respondent, in computing the invested capital for each of the taxable periods in question, erred in failing to take into account, as paid-in surplus, the value of the coal lands acquired by the petitioner from the principal stockholder definitely known or accurately ascertainable as of the date of acquisition.  The petitioner later confined its contention in this regard to only two tracts of land, the Linn tract and the Brown tract.  Petitioner depends upon section 207 of the Revenue Act of 1917 and section 326(a) of the Revenue Act of 1918.  Section 207 of the Revenue Act of 1917 provides: SEC. 207.  That as used in this title, the term "invested capital" for any year means the average invested capital for*2629  the year, as defined and limited in this title, averaged monthly.  As used in this title "invested capital" does not include stocks, bonds (other than obligations of the United States), or other assets, the income from which is not subject to the tax imposed by this title nor money or other property borrowed, and means, subject to the above limitations: (a) In the case of a corporation or partnership: (1) Actual cash paid in, (2) the actual cash value of tangible property paid in other than cash, for stock or shares in such corporation or partnership, at the time of such payment (but in case such tangible property was paid in prior to January first, nineteen hundred and fourteen, the actual cash value of such property as of January *297  first, nineteen hundred and fourteen, but in no case to exceed the par value of the original stock or shares specifically issued therefor), and (3) paid in or earned surplus and undivided profits used or employed in the business, exclusive of undivided profits earned during the taxable year: * * * The Commissioner's regulations under the Revenue Act of 1917 provided: Where it can be shown by evidence satisfactory to the Commissioner of*2630 Internal Revenue that tangible property has been conveyed to a corporation or partnership by gift or at a value, accurately ascertainable or definitely known as at the date of coveyance, clearly and substantially in excess of the cash or the par value of the stock or shares paid therefor, then the amount of the excess shall be deemed to be paid in surplus.  The adopted value shall not cover mineral deposits or other properties discovered or developed after the date of conveyance, but shall be confined to the value accurately ascertainable or definitely known at that time.  Section 326(a) of the Revenue Act of 1918 provides: SEC. 326. (a) That as used in this title the term "invested capital" for any year means (except as provided in subdivisions (b) and (c) of this section): (1) Actual cash bona fide paid in for stock or shares; (2) Actual cash value of tangible property, other than cash, bona fide paid in for stock or shares, at the time of such payment, but in no case to exceed the par value of the original stock or shares specifically issued therefor, unless the actual cash value of such tangible property at the time paid in is shown to the satisfaction of the Commissioner*2631  to have been clearly and substantially in excess of such par value, in which case such excess shall be treated as paid-in surplus: * * * The petitioner contends that the land (cost, $26,235.27) and the total payments of $1,764.73 were paid in to petitioner for capital stock and that it is entitled to a paid-in surplus as of the date of organization, of $950,000, this amount representing the alleged difference between the value of the coal lands acquired and the par value of its capital stock issued, in the amount of $50,000.  However, we are not convinced that the land was paid in to petitioner in exchange for stock.  A record book of petitioner marked "check book" shows that on July 14, 1906, there was deposited to the credit of petitioner an amount of $26,235.27.  This same book, by entry dated July 13, 1906, shows that a check payable to "yourselves" in the amount of $26,235.27 was issued by petitioner for the Brown and Linn properties.  This book shows that on June 30, 1906, Walter Oakes paid petitioner $1,000, which petitioner's books show was received in payment of stock subscriptions.  On July 13, 1906, the books show that two other payments were made - one in the amount*2632  of $64.73 by Oakes and one in the amount of $700 by an undisclosed person.  The *298  general journal and ledger of petitioner shows that $28,000 cash was paid for 56 per cent stock assessment as follows: June 30, 1906$1,000.00July 13, 1906764.73July 14, 190626,235.2728,000.00In the absence of clear evidence to the contrary, we must assume that the books of petitioner, in showing that the stock was issued for cash and that the properties in question were acquired by petitioner for cash, truly reflect the transactions.  The respondent has allowed in petitioner's invested capital an amount of $63,246.16, this representing the cost of the properties.  This includes the $26,235.27 paid for the Brown and Linn tracts.  Petitioner contends that even if we find that the property was not acquired for stock, the value of the property was greatly in excess of the amount allowed in invested capital and that petitioner is entitled to special assessment under section 210 of the Revenue Act of 1917 and section 328 of the Revenue Act of 1918.  Section 210 of the Revenue Act of 1917 provides: SEC. 210.  That if the Secretary of the Treasury is unable in*2633  any case satisfactorily to determine the invested capital, the amount of the deduction shall be the sum of (1) an amount equal to the same proportion of the net income of the trade or business received during the taxable year as the proportion which the average deduction (determined in the same manner as provided in section two hundred and three, without including the $3,000 or $6,000 therein referred to) for the same calendar year of representative corporations, partnerships, and individuals, engaged in a like or similar trade or business, bears to the total net income of the trade or business received by such corporations, partnerships, and individuals, plus (2) in the case of a domestic corporation $3,000, and in the case of a domestic partnership or a citizen or resident of the United States $6,000.  For the purpose of this section the proportion between the deduction and the net income in each trade or business shall be determined by the Commissioner of Internal Revenue in accordance with regulations prescribed by him with the approval of the Secretary of the Treasury.  In the case of a corporation or partnership which has fixed its own fiscal year, the proportion determined*2634  for the calendar year ending during such fiscal year shall be used.  The petitioner has not proved that its invested capital can not be satisfactorily determined, and for the taxable year ended June 30, 1917, the petitioner is not entitled to special assessment.  Mining men who were called as witnesses by petitioner testified that they estimated in 1906 that the Linn and Brown tracts contained at least 2,000,000 tons of recoverable coal in the Roslyn and Big Dirty seams, and that coal could be mined at that time at a profit of $1 per ton.  However, in 1909, at which time petitioner's properties were more fully developed, the petitioner revalued all its coal lands *299  at $269,528.07.  From a consideration of all the evidence we are of the opinion that the Linn and Brown properties had a value substantially in excess of their cost to petitioner.  Section 327 of the Revenue Act of 1918 provides: SEC. 327.  That in the following cases the tax shall be determined as provided in section 328; * * * (d) Where upon application by the corporation the Commissioner finds and so declares of record that the tax if determined without benefit of this section would, owing to abnormal*2635  conditions affecting the capital or income of the corporation, work upon the corporation an exceptional hardship evidenced by gross disproportion between the tax computed without benefit of this section and the tax computed by reference to the representative corporations, specified in section 328.  This subdivision shall not apply to any case (1) in which the tax (computed without benefit of this section) is high merely because the corporation earned within the taxable year a high rate of profit upon a normal invested capital, nor (2) in which 50 per centum or more of the gross income of the corporation for the taxable year (computed under section 233 of Title II) consists of gains, profits, commissions, or other income, derived on a cost-plus basis from a Government contract or contracts made between April 6, 1917, and November 11, 1918, both dates inclusive.  It is true that we have held that the mere fact of statutory exclusion of values from invested capital does not indicate an abnormality, yet, where, as in , and *2636 , there is thereby created an abnormality affecting invested capital and income, the petitioner is entitled to special assessment.  In the instant proceeding the Linn and Brown properties were a substantial income-producing factor in petitioner's business, and we believe that the exclusion of the greater part of the value of these properties from invested capital of petitioner created an abnormality.  The petitioner is entitled to special assessment for the taxable year ended June 30, 1918, for the period July 1, 1918, to December 31, 1918, and for the calendar year 1920.  See , affd., ; certiorari denied, . The respondent, for the purposes of determining invested capital for the fiscal years ended June 30, 1917, and June 30, 1918, set up a tentative tax in determining the amount of earnings available for distribution as dividends.  In so doing the respondent erred.  . The petition under Docket No. 22072, relating to the year 1920, contains the following allegation of error: *2637  The said Commissioner erred in reducing statutory invested capital with respect to the amount of income, war-profits and excess-profits taxes for the fiscal year ended June 30, 1917; the fiscal year ending June 30, 1918; the taxable period of six months ending December 31, 1918; and the calendar year *300  1919, subject to averaging as provided by statute, in excess of the said taxes properly assessable and payable for the said taxable years.  However, there is no evidence in the case to show that the respondent acted in the manner alleged and we may not consider the question.  Reviewed by the Board.  Judgment will be entered under Rule 62(c).