IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed and have affixed their seals as of the date and year first above written.

In accordance with the amendatory agreement petitioner assessed against the operating bus companies the following net deficiencies, as determined for the years 1942 to 1946, inclusive:

On September 14, 1945, the petitioner assessed the following amounts against the three operating bus companies as their pro1952 U.S. Tax Ct. LEXIS 34">*51 rata share of the aforesaid additional taxes due the Federal Government and the State of North Carolina:

19 T.C. 336">*343 These amounts were itemized on the vouchers as "loan for taxes."

In October 1945 petitioner also assessed against the three operating bus companies North Carolina revenue taxes in the amount of $ 922.33 and Federal income taxes for the year ended July 31, 1946, in the amount of $ 3,801.47.

The petitioner set up "Accounts Payable" (stated to represent "advances" or "loans" from the operating bus companies) on its books and records in the respective names of the operating bus companies and credited such account with its respective amount of the aforesaid additional Federal income and North Carolina state taxes during the fiscal year ended July 31, 1946, totaling $ 50,025.48:

There was also credited to these respective "Accounts Payable" on the petitioner's1952 U.S. Tax Ct. LEXIS 34">*52 books, representing additional Federal income and North Carolina state taxes assessed against the operating bus companies during the fiscal year ended July 31, 1947, the following sums:

During the fiscal years ended July 31, 1945, 1946, and 1947, petitioner did not follow the terms of the amendatory agreement in billing the lessee bus companies for rental for such years. The petitioner billed the bus companies for its cash requirements only. In computing its rental income from the three operating bus companies the petitioner considered only actual billings. On the basis of such computation the petitioner reported the following net income and tax liability:

In his deficiency notice the respondent computed the petitioner's rental income for the fiscal year ended July 31, 1945, in accordance with the provisions of the agreement of November 26, 1940. For the fiscal years ended July1952 U.S. Tax Ct. LEXIS 34">*53 31, 1946, and 1947, the rental income was computed under the amendatory agreement executed June 14, 1945.

19 T.C. 336">*344 The difference in income, as reported by petitioner and as determined by respondent, is set forth in the following schedule:

1952 U.S. Tax Ct. LEXIS 34">*54 In his deficiency notice respondent computed petitioner's taxable net income for each of the taxable years involved as follows:

In computing petitioner's income for the taxable years ended on or before July 31, 1944, the respondent determined that Federal income and excess profits taxes, as well as the North Carolina state income tax, were reimbursable by the lessee bus companies as part of their rental under the agreement of November 26, 1940. The petitioner accepted the determination and agreed to the deficiencies and/or overassessment of $ 41,992.39. Deficiencies in state income taxes for the same period amounted to $ 3,309.29, aggregating1952 U.S. Tax Ct. LEXIS 34">*55 the sum of $ 45,301.68.

19 T.C. 336">*345 During the fiscal year ended July 31, 1946, the petitioner was advanced sums necessary to pay the deficiencies, aggregating $ 45,301.68, and the reported liabilities due for Federal and state income taxes for the fiscal year ended July 31, 1945, in the amounts of $ 3,801.47 and $ 922.33, respectively. During the fiscal year ended July 31, 1947, the petitioner was advanced $ 688.40 to pay reported Federal and state income taxes of $ 548.39 and $ 140.01, respectively, for the fiscal year ended July 31, 1946. The respondent included the so called advances of $ 41,992.39 and $ 3,309.29 in determining rental income due from the bus companies for the fiscal year ended July 31, 1945.

During June 1946 the stockholders of petitioner contributed cash in the amount of $ 11,300, which was credited to paid-in surplus. Pursuant to a resolution of the stockholders of petitioner, dated October 31, 1947, one hundred sixteen shares of petitioner's stock, representing a stated value of $ 11,600, were issued for the $ 11,300 paid-in surplus and additional cash contributions of $ 300, as follows:

1952 U.S. Tax Ct. LEXIS 34">*56 For the fiscal year ended July 31, 1945, petitioner billed the three bus companies monthly for their pro rata share of depreciation sustained on its building and equipment. Depreciation was computed at the rate of $ 418.13 per month, or a total of $ 5,017.56.

In assessing the operating bus companies quarterly for the amount due and payable on the petitioner's mortgage principal indebtedness during the fiscal year ended July 31, 1945, there was deducted from the quarterly principal payments on the mortgage of $ 4,050 three months' depreciation of $ 418.13 per month, or $ 1,254.39. Thus, only the net amount of $ 2,795.61 was billed as principal payments due on the mortgage. The total amount deducted by petitioner as depreciation from the quarterly mortgage principal payments payable and so billed during the fiscal year was $ 5,017.48, the amount deducted by petitioner as depreciation on its return for 1945.

For the fiscal year ended July 31, 1946, petitioner billed the three operating bus companies monthly for their pro rata share of depreciation sustained on its building and equipment. Depreciation was computed at the rate of $ 418.13 for the month of August, $ 373.93 for the month1952 U.S. Tax Ct. LEXIS 34">*57 of September, and $ 396.03 for the remaining 10 months, or a total of $ 4,752.38.

19 T.C. 336">*346 In assessing the three operating bus companies quarterly for the amount due on the mortgage principal indebtedness during said fiscal year there was deducted from the quarterly principal payment of $ 4,050 three months' depreciation at the rate of $ 396.03, or a total of $ 1,188.09. Thus, only the net amount of $ 2,861.91 was billed as principal payment due on the mortgage by the operating companies. The total amount deducted as depreciation from quarterly mortgage payments payable and so billed during said fiscal year totaled $ 4,752.38, the amount deducted by petitioner on its return.

For the fiscal year ended July 31, 1947, petitioner billed the three operating bus companies monthly for their pro rata share of depreciation at the rate of $ 396.03, or a total of $ 4,752.36. In addition thereto depreciation in the amount of $ 116.08, computed on the new equipment acquired during such year, was deducted by petitioner on its return but was not billed to the three operating companies.

In assessing the three operating bus companies quarterly for the amount due and payable on the mortgage principal1952 U.S. Tax Ct. LEXIS 34">*58 indebtedness during the fiscal year ended July 31, 1947, there was deducted from the quarterly mortgage principal payments of $ 4,050 three months' depreciation at the rate of $ 396.03, or $ 1,188.09. Only the net amount of $ 2,861.91 was billed as principal payment due on the mortgage principal by the operating bus companies. The total amount deducted by petitioner as depreciation from quarterly mortgage payments payable and so billed during such fiscal year totaled $ 4,752.36, which amount, plus the $ 116.08 depreciation on new equipment, equals the sum of $ 4,868.44, deducted by the petitioner as depreciation on its return for such year.

The agreement and lease dated November 26, 1940, was in effect and governed the rights, privileges, and obligations of the respective parties thereto until the amendatory agreement was executed on June 14, 1945. Subsequent to June 14, 1945, the agreement and lease of November 26, 1940, as modified by the amendatory agreement executed on June 14, 1945, was in effect and governed the rights, privileges, and obligations of the respective parties thereto.

OPINION.

The primary question presented is whether the income of petitioner is to be computed1952 U.S. Tax Ct. LEXIS 34">*59 under the provisions of the agreement and lease dated November 26, 1940, as modified by an amendatory agreement executed June 14, 1945, as the respondent determined, or on the basis of actual billings, as reported by petitioner.

The contention of petitioner appears to be that the agreement of November 26, 1940, was one which the parties could alter, amend or abrogate by parol at any time, and that the parties by parol agreements 19 T.C. 336">*347 and conduct contrary to its provisions, in effect, abandoned the agreement and substituted therefor a new agreement of monthly billings.

The petitioner is a North Carolina corporation organized for the purpose of erecting and operating a bus terminal with appropriate facilities. All of its capital stock issued at the time of its incorporation was owned by three operating bus companies. Petitioner is a separate taxable entity. Where business is conducted through separate corporate entities separateness will be recognized in matters relating to taxation regardless of the disadvantages entailed. ; .1952 U.S. Tax Ct. LEXIS 34">*60

On November 26, 1940, petitioner and the three operating bus companies entered into a written agreement under which petitioner agreed to erect a terminal with the necessary facilities, and the operating bus companies agreed to use such facilities for a period of 15 years and to pay, as rent, an amount to be determined under a prescribed formula. Such agreement refers to the respective parties as "lessor" and "lessees." The payments to be made thereunder are denominated "rent." In many of its provisions the agreement is referred to as a "lease." Whether the agreement in question is in fact a lease is not, for present purposes, necessary for us to determine, since, in our opinion, the agreement touches an interest in realty or concerns realty and is one required to be in writing. General Statutes of North Carolina, 1943, sec. 22-2. ; . According to the weight of authority, a written contract within the statute of frauds cannot be varied by any subsequent agreement of the parties, 1952 U.S. Tax Ct. LEXIS 34">*61 unless such new agreement is also in writing. ; ; Stowell v. Robinson, 3 Bing. N. C. 927.

If the agreement is one which the statute requires to be in writing any material modifications or alterations resting in parol would be ineffective to the extent they were unexecuted.

This record establishes that the first written amendatory agreement was executed on June 14, 1945. The parties have attempted to make it retroactive to July 31, 1944. If the original agreement is one required to be in writing, to permit the amendatory agreement to be made retroactive, we think, would in effect annul the statute.

Assuming that we are in error in concluding that the original agreement was one required to be in writing and that it could be altered or modified at the will of the parties, this record does not establish with sufficient clearness what the parol modifications were or a definite time when they were entered into. The respondent has given recognition 19 T.C. 336">*348 to the written amendatory agreement as of the date of its1952 U.S. Tax Ct. LEXIS 34">*62 actual execution on June 14, 1945.

We think the agreement of November 26, 1940, as amended by the amendatory agreement of June 14, 1945, fixed the rights, privileges, and obligations of the respective parties thereto and that the respondent properly computed the income of petitioner under its terms and provisions.

The second issue involves the question whether, under the agreement of November 26, 1940, the income and excess profits taxes asserted against petitioner were to be reimbursed to it by the three operating bus companies, and constituted rental income of petitioner.

It is contended by petitioner that the agreement of November 26, 1940, makes no specific mention of income and excess profits taxes and that it was the intention of the operating bus companies that petitioner should be operated on a nonprofit basis and was to earn no income that would subject it to income and excess profits taxes. The respondent contends that under section 9 of the agreement the operating bus companies were to pay to petitioner as rent all net expenses determined, as provided therein. Section 9 of the agreement is set forth in full in our findings of fact and need not be repeated here.

The term1952 U.S. Tax Ct. LEXIS 34">*63 "expenses" is a word of broad meaning. It has no fixed definition. It is comprehensive enough to include a wide range of disbursements. . We think the use of the term "expenses" renders the agreement ambiguous. Where ambiguity exists the construction given by the parties will be given great, if not controlling, influence. . As said in the case of , there is no surer way to find out what the parties meant than to see what they have done.

Income taxes paid by petitioner for the calendar year 1942 and for the fiscal year ended July 31, 1943, were included and billed to the operating bus companies in computing rentals due for the fiscal years ended July 31, 1943, and 1944, respectively. In view of the interpretation given to the provisions of the agreement of November 26, 1940, by the conduct of the parties, we think the agreement is to be construed as requiring the operating bus companies to pay1952 U.S. Tax Ct. LEXIS 34">*64 to petitioner, as a part of their rent, the income and excess profits taxes asserted against petitioner.

The record shows that petitioner first realized in March 1945 that it would have to include as taxable income to it for the current fiscal year all additional taxes accrued for the prior fiscal year. Such knowledge gave rise to the desire of the parties to amend the agreement so as to specifically provide that income and excess profits taxes 19 T.C. 336">*349 were not to be included as an expense. The written amendatory agreement executed June 14, 1945, so provided. The petitioner contends that the parties had orally agreed to a modification of the original agreement with respect to the payment of such taxes and that the written agreement was predated to the time when such oral agreement was entered into. As heretofore stated, we think the amendatory agreement could not be made retroactive. If any retroactive effect is to be given to it, such retroactive effect should not be carried back to a time preceding the making of the alleged parol agreement with respect to the payment of income and excess profits taxes, which is shown by the evidence to have occurred about March 1945.

The 1952 U.S. Tax Ct. LEXIS 34">*65 additional Federal income taxes of $ 45,150.16 and North Carolina income tax of $ 3,309.29, asserted against petitioner for the fiscal year ended July 31, 1944, accrued on October 15, 1944, as a debt payable by petitioner. Under the agreement of November 26, 1940, petitioner was entitled to reimbursement of such amounts as rent. As of the beginning of the fiscal year July 31, 1945, the petitioner had the right to receive as rental income for that year the income taxes payable on income earned in the preceding year. ; ; ; .

The respondent has recognized the amendatory agreement as of June 14, 1945, and has not included in petitioner's taxable income for the fiscal years ended July 31, 1946, and 1947, the additional income taxes asserted for the respective taxable years ended July 31, 1945, and 1946.

The amendatory agreement of 1952 U.S. Tax Ct. LEXIS 34">*66 June 14, 1945, contains a provision to the effect that the operating bus companies would "loan" the petitioner the money to pay taxes then due and to make similar loans for succeeding years, all of which loans were to be made by the operating bus companies in the amount representing that portion of such taxes which such companies would have been required to pay if such sums had been included in the respective taxable periods as items of expenses under section 9 (e) (1), as it existed prior to the amendment contained in the amendatory agreement.

The respondent contends that the attempt to treat as "loans" the payments to cover income taxes for prior years which accrued during the taxable year was in violation of the agreement of November 26, 1940, and a tax avoidance scheme which should not be recognized for tax purposes.

We find it unnecessary to characterize the motives which prompted the parties to make such agreement. Unless retroactive effect is to be 19 T.C. 336">*350 given to the amendatory agreement, which we have declined to do, income taxes of petitioner which accrued and were payable to it by the operating bus companies as rent under the agreement prior to its amendment constitute1952 U.S. Tax Ct. LEXIS 34">*67 income taxable to petitioner notwithstanding the parties have treated the payments as loans. To hold otherwise, in our opinion, would permit petitioner to distort its income.

The final issue involves the question of depreciation as representing taxable income of petitioner. The total depreciation sustained by petitioner on its buildings and equipment in the fiscal years ended July 31, 1945, 1946, and 1947, in the respective amounts of $ 5,017.48, $ 4,752.38, and $ 4,868.44, has been included by the respondent in petitioner's income for such respective years. All the aforesaid amounts, except the sum of $ 116.08 for the fiscal year ended July 31, 1947, were billed to and paid by the operating bus companies to petitioner on a prorated basis as rent. Depreciation is specifically mentioned in section 9 (e) (1) of the agreement of November 26, 1940, as one of the items to be included in the statement of total expenses of the terminal company, petitioner herein.

Petitioner contends that the inclusion of the term "depreciation" in the agreement was the result of a mutual mistake. This record, however, does not show, nor does petitioner contend, that the agreement was amended in such1952 U.S. Tax Ct. LEXIS 34">*68 respect either orally or in writing prior to or during the taxable years involved. Nor have the parties ever instituted any proceeding to have the agreement reformed to express their real intention. In the absence of any such affirmative action, we think, the agreement is to be given effect as written. We hold, therefore, that depreciation sustained by petitioner which was billed to and paid by the operating bus companies as rent constituted income taxable to petitioner in each such fiscal year.

Therefore, we hold that the income of petitioner in the respective taxable years involved is to be computed in accordance with the terms of the agreement of November 26, 1940, until the execution of the amendatory agreement on June 14, 1945, and thereafter in accordance with the terms of such agreement as modified, and not on the basis of actual billings as reported by petitioner.

Decision will be entered under Rule 50.