This appeal is brought to review a decision of tbe United States Board of Tax Appeals which affirmed a ruling of tbe Commissioner of Internal Revenue determining a deficiency of $7,000.96 in income and excess profit taxes for tbe fiscal year ending May 31, 1920. Appellant seeks classification as a personal service corporation. Tbe only question involved is whether, under tbe statutory definition of such corporation, tbe capital of tbe company is a material income-producing factor.- The Board of Tax Appeals found that it was, and tbe judgment must be sustained if there is any substantial evidence supporting that finding, for tbe reason that tbe grant of exclusive power to tbe Board finally to determine tbe facts upon which tax liability is based limits tbe review on appeal to questions of law. It is conceded that if tbe capital of tbe company was a material income-producing factor tbe law was correctly applied.
• Appellant is a Colorado corporation, engaged in tbe business of buying and selling live stock for others, at Denver, Colo. It appears that in addition to these activities appellant bad also been in tbe loan business. Of this its counsel say in their brief: “Prior to tbe fiscal year in question, i. e., June 1, 1919, to May 31, 1920, tbe company engaged in certain loaning activities; but early in January, 1919, tbe Stoekman’s Loan Company was organized and a verbal agreement entered into with that company that they would' take over loans of Appellant which were not paid and which stood inspection at maturity. Tbe loan company reserved tbe right to throw out loans that were not acceptable and not up to their standards. Tbe loan company was not to receive any share of Appellant’s profits and Appellant was not to receive any of tbe profits from tbe loan com- - pany. By this arrangement and tbe liquidation of loans, tbe loans carried by tbe Appellant in tbe taxable year were considerably less than those carried in prior years, tbe loans carried over being those that were not acceptable to tbe loan company. Some of tbe secured and a few of tbe unsecured loans were rediscounted at tbe bank during tbe year.”
It conclusively appears from tbe facts found, and evidence introduced upon, which that finding was based, that at tbe beginning of tbe taxable year appellant held notes receivable in tbe amount of $335,596.41, and at tbe close of tbe year in tbe amount of $195,500.47; that during that time it made loans exceeding $167,000; that its income from commissions in its business of buying and selling live stock for others exceeded $84,000, and from other sources, including interest on its loans, more than $22,000 — its total gross income being in excess of $106,-000. Thus its income from capital sources was approximately one-fifth of its total income. It is true that deductions on account of rediscounts, etc., reduced its net income from capital sources, if applied exclusively •to such sources, to a loss; but this does not alter tbe principle that tbe capital invested was income producing and formed one factor of its business. In such case, tbe loss or gain must be computed upon tbe entire business and not upon any one factor; just as in tbe familiar ease of a railway system with different branches, some of which pay and some of whieb do not pay, tbe return upon capital is computed upon tbe business as a whole and not upon that of any subdivision. In addition to its capital, appellant carried a surplus of more than $100,-000 for tbe protection of its loans and to meet other demands of its business. It bad in tbe past financed its customers and used its capital for that purpose; this, in turn, contributed to tbe volume of its business and to resulting profits. During the fiscal year involved it was still necessarily engaged in tbe same activities to an appreciable extent. It may, as stated, have contemplated a withdrawal from tbe business of financing its customers, and from loan operations generally, and may have made progress in that direction. When it has done *545 so to a controlling extent,’ it may then, as conceded by the government, be classified as a public service corporation; but for the year under consideration there is substantial evidence to support the finding of the Commissioner and of the Board that its capital still remained a material income-producing factor; this being so, the finding of the Board of Tax Appeals is conclusive. We cannot indulge the contention of counsel that the term “income,” as employed in the statute, is restricted to net ineome; that whether, in any given year, a corporation is to be classified as a personal service corporation, depends upon whether its capital in that particular year resulted in the production of net income, and that such a corporation may be classified as general in one year and as a personal service corporation in another year, dependent upon the financial result of its operations.
It follows that the judgment of the Board of Tax Appeals should be affirmed, and it is so ordered.