Smith, Kaufman and Hays, Circuit Judges. Irving R. Kaufman, Circuit Judge (dissenting in part).
Petitioners seek review of a decision of the Tax Court sustaining the Commissioner's determination of deficiencies in their income tax payments for the years 1958 through 1962, inclusive. The Tax Court upheld both the Commissioner's allocation to Borge*fn1 under Section 482 of the Internal Revenue Code of 1954, 26 U.S.C. § 482 (1964), of a portion of the compensation received by Danica Enterprises, Inc., Borge's wholly owned corporation, for services performed by Borge as an entertainer, and the Commissioner's disallowance, under Section 269 of the Internal Revenue Code of 1954, 26 U.S.C. § 269 (1964), of Danica's deduction of losses from its rock cornish hen business in excess of $50,000 per year, and of its loss carryovers.*fn2 We affirm.
From April 1952 through February 28, 1959, Borge conducted a poultry business on a 400-acre farm in Connecticut under the name of ViBo Farms. The farm business centered on and pioneered in the development and commercial sale of processed, quality chickens called rock cornish hens.
Borge incurred substantial losses in his poultry business.*fn3 For each of the years 1954 through 1957 the poultry losses exceeded $50,000. In the first two months of 1958 the poultry losses amounted to $23,133, and market conditions were unfavorable. Borge's tax consultant advised him that if the poultry losses for 1958 exceeded $50,000 the Commissioner would probably recompute Borge's taxes for each year that the losses had exceeded $50,000, pursuant to Section 270 of the Internal Revenue Code of 1954, 26 U.S.C. § 270 (1964).*fn4 In an effort to avoid the application of Section 270, Borge organized Danica, and, on March 1, 1958, transferred to the corporation, in exchange for all of its stock and a loan payable, the assets of the poultry business (except the farm real property).
Borge is a well-known professional entertainer. During the years preceding the organization of Danica he made large sums from television, stage and motion picture engagements.
Since Danica had no means of meeting the expected losses from the poultry business, Borge and Danica entered into a contract at the time of the organization of the corporation under which Borge agreed to perform entertainment and promotional services for the corporation for a 5-year period for compensation from Danica of $50,000 per year. Danica offset the poultry losses*fn5 against the entertainment profits, which far exceeded the $50,000 per year it had contracted to pay Borge.*fn6 Borge obviously would not have entered into such a contract with an unrelated party.
Danica did nothing to aid Borge in his entertainment business. Those who contracted with Danica for Borge's entertainment services required Borge personally to guarantee the contracts. Danica's entertainment earnings were attributable solely to the services of Borge, and Danica's only profits were from the entertainment business.
The only year during the period in dispute in which Danica actually paid Borge anything for his services was 1962, when Borge was paid the full $50,000.
The issues in controversy are (1) whether the Commissioner, acting under Section 482 of the Internal Revenue Code of 1954, 26 U.S.C. § 482 (1964), properly allocated to Borge from Danica $75,000 per year from 1958 through 1961 and $25,000 for 1962, and (2) whether the Commissioner, acting under Section 269 of the Internal Revenue Code of 1954, 26 U.S.C. § 269 (1964), properly disallowed Danica's loss deductions in excess of $50,000 per year for fiscal years 1959 through 1961 and its net loss carryovers for fiscal years 1960 through 1962.
When two or more organizations, trades or businesses, whether or not incorporated, are owned or controlled by the same interests, Section 482 of the Internal Revenue Code of 1954, 26 U.S.C. § 482 (1964), authorizes the Commissioner to apportion gross income between or among such organizations, trades or businesses if he deems that apportionment is necessary clearly to reflect income or to prevent evasion of tax.*fn7 We conclude that the Commissioner could properly have found that for purposes of Section 482 Borge owned or controlled two businesses, an entertainment business and a poultry business, and that the allocation to Borge of part of the entertainment compensation paid to the corporation was not error.*fn8
We accept, as supported by the record, the Tax Court's finding: that Borge operated an entertainment business and merely assigned to Danica a portion of his income from that business; that Danica did nothing to earn or to assist in the earning of the entertainment income; that Borge would not have contracted for $50,000 per year with an unrelated party to perform the services referred ...