The opinion
*1226 OPINION.
Aeundell:
The Davidson Co. owned 55 per cent of the stock of petitioner and claims that it controlled the 45 per cent owned by Sutherland, thus giving it ownership and control of substantially *1227 all of tlie stock. But the record fails to present more than indications of potential control of the stock owned by Sutherland. The Sutherland Manufacturing Co. was organized not alone because it was thought that a branch of the Davidson Co.’s business could thereby be run more efficiently, but also to insure the retention of Sutherland’s services. He was the manager and active head of the petitioner and, so far as the record discloses, was free to vote his stock as his judgment dictated. The fact that Sutherland and the other stockholders worked harmoniously does not establish control by either of the stock of the other.
In the Appeal of Isse Koch & Co., 1 B. T. A. 624, we held that the control required by the statute was an actual control as distinguished from strictly legal control, but that s'uch control must be actually exercised and mere potential control will not suffice. We find no evidence in the record of the exercise of control by the Davidson Co. of the stock owned by Sutherland and we can not assume that it in fact existed. There was, undoubtedly, a close working agreement between the companies and some transactions between them were on an artificial basis, particularly during the early life of petitioner, but mere economic unity does not meet the statutory test. Appeal of Rishell Phonograph Go., 2 B. T. A. 229. The provision in the by-laws that no stockholder shall transfer his stock without first offering it to the executive officers of the company can not serve to give the Davidson Co. control of Sutherland’s stock. He may never desire to sell the stock, but even if he did desire to do so, he was under no obligation to sell to them, though it may be assumed he would do so provided the price offered was equal to what he could secure elsewhere. The evidence of control is not convincing. Appeal of R. A. Tuttle Co., 1 B. T. A. 1218 ; Appeal of Block Street Wharf & Warehouse Co., 2 B. T. A. 183.
The deficiences are $3,05035 for 1919 and $11^,$11.66 for 19$0. Order will he entered accordingly.