ascertain the financial standing of the Longacre Company and verified the statement made by its officers to the effect that any pressure would precipitate bankruptcy. Thereafter, in 1921, the collection was placed in the hands of an attorney. In May, 1921, a receiver was appointed for the James Theatre Co., and thereafter during 1921 the petitioner was advised that the estimated gross value of the property was $1,100,000. Against this value there was a first mortgage bond issue of $680,000 and in addition there were creditors with claims aggregating about $300,000. It was the opinion of Bickford, the secretary and treasurer of the petitioner, that in case of a forced sale the contracting creditors would receive nothing, since the bondholders had priority, and in 1921 general financial conditions were very bad. Bickford was then of the opinion that the petitioner's claim was worth little or nothing and he thereupon instructed the petitioner's auditor to charge off the account as bad at the time of the closing of the books on December 31, 1921. Bickford's information in respect to the petitioner's ability to collect the claim from the Longacre Company, with whom the contract had been made, was to the effect that there was no chance of collecting against such company. This opinion was based on financial reports and information obtained from the vice president of the Longacre Company. The petitioner was therefore of the opinion that the only recourse was by filing a lien against the building. After investigations by the petitioner's attorney, it decided that any effort to collect the amount of the debt from the Longacre Company would be futile. Thereafter, in 1921, the petitioner filed a mechanic's lien against the James Building. In 1923, $18,000 was collected through the petitioner's attorney. The amount collected was the result of a compromise with the James Building Co. in order to free the property from the claims of lienors. OPINION. MURDOCK: In order to establish its right to this deduction it was necessary for the petitioner to show that such a debt was actually ascertained to be worthless in the taxable year and that it was the kind of a debt that Congress intended should be deducted under section 234 (a) (5) of the Revenue Act of 1921. See Charles A. Collin, 1 B. T. A. 305, and Howard J. Simons, 1 B. T. A. 351. The petitioner introduced in evidence a transcript of its books of account which showed certain debits and credits in an account entitled "James Theatre." Opposite each of the debits in this account were the letters "mdse." The debit balance of this account was the amount sought to be charged off as a bad debt. No effort was made to explain what the various debits in this account represented. The letters "mdse" would indicate that the charges were for merchandise furnished, but whether at cost or at some other figure we do not know. If the petitioner furnished merchandise we do not know sufficient facts concerning this merchandise, such as its cost and the date of its purchase, to enable us to determine whether or not the Commissioner erroneously disallowed a deduction on account of it. We do not know how the petitioner kept its books or made its income-tax returns or how it treated the items in question for income-tax purposes. Without knowing more about this alleged bad debt we are unable to say whether or not the Commissioner was in error in denying the deduction in the taxable year. Consistent with the facts which we already know, other facts in the case, if we knew them, might show that no part of the amount should be deducted or they might show that a part or all of the amount should be deducted as a bad debt in the taxable year. Under these circumstances, it is unnecessary to discuss the question of whether or not the debt was ascertained to be worthless in the taxable year. Judgment will be entered for the respondent. A. DAIGGER & Co., PETITIONER, V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Docket Nos. 14733, 14734. Promulgated July 24, 1928. INVENTORIES.—Petitioner took its inventories at cost or market whichever was lower. Certain items of merchandise were included in petitioner's inventory on December 31, 1920, at a cost of $22,774.22 when as a matter of fact the market value of such merchandise was only $3,769.02. Held, that the closing inventory for 1920 of $135,712.95 as determined by the respondent should be reduced by $19,005.20 and the deficiencies for 1920 and 1921 be redetermined accordingly. M. Manning Marcus, Esq., for the petitioner. In this proceeding the petitioner seeks a redetermination of its income-tax liability for the calendar years 1920 and 1921, for which the respondent in his deficiency letters dated February 24, 1926, and February 6, 1926, determined deficiencies of $10.526.05 and $148.85, respectively. Two errors were assigned. The first was withdrawn at the hearing, leaving only the question as to whether the closing inventory for the year 1920 was overstated in the amount of $19,005.20. 65326°-297 FINDINGS OF FACT. The petitioner is an Illinois corporation with its principal office in Chicago. Its business is buying and selling, both at wholesale and retail, laboratory supplies and chemicals. Its operations were divided into several departments, namely, the Laboratory Supply Department, the Heavy Chemical Department, and the Specialty and Foreign Department. The basis on which the petitioner took its inventories was cost or market whichever was lower. Early in 1920 the petitioner's president, Max Woldenberg, went to Berlin, Germany, for the purpose of purchasing chemicals, but due to the scarcity of these commodities in the market he was not successful and thereupon determined to purchase other merchandise. He was introduced to the firm of Feller & Company, with whom he made an agreement whereby Feller & Company were to purchase for the petitioner any German merchandise which in their opinion could be profitably marketed in the United States and as compensation for such services they were to receive 50 per centum of the profits made by the petitioner on the sale of such merchandise. It was further agreed that should a loss occur on such articles the German company would receive no compensation and the petitioner would bear the entire loss. During 1920, and in accordance with the above mentioned agreement, articles such as scissors, razors, door checks, miscellaneous cutlery, small musical instruments, spectacle frames, ships, dolls, and miscellaneous toys costing $22,774.22 were purchased by Feller & Company and shipped to the petitioner at Chicago. Although the above merchandise was actually received by the petitioner during 1920, none of it was sold during that year. In making up its inventory for the close of 1920, Woldenberg consulted officials of at least five of the leading firms of Chicago and one of Milwaukee as to what in their opinion was the market value on December 31, 1920, of the merchandise it had received from Feller & Company. Based on this information, he personally determined that the market value of the goods which had cost $22,774.22 was only $3.769.02. During the subsequent years 1921 and 1922, the foreign goods in question sold for a little over $6,000. The spectacles which had been invoiced as 14 carat gold turned out to be brass and obsolete. The respondent determined that the market value on December 31, 1920, of the merchandise purchased by Feller & Company for the petitioner was equal to its cost. The market value of such goods on December 31, 1920, was $3,769.02. In determining the deficiency for 1920, the respondent used as a total closing inventory for that year the amount of $135,712.95. In determining the deficiency for 1921, the respondent used as a total opening inventory for that year the amount of $119,422.62. OPINION. GREEN: Although the question here relates to inventories, it resolves itself into a question of fact as to the market value on December 31, 1920, of certain goods purchased in Germany. We have found that this market value 'was $3,769.02. We turn now to the effect that such a finding will have on the deficiencies determined by the respondent. The respondent determined the deficiency for 1920 on the basis of a total closing inventory for that year of $135,712.95 and a net income of $39,623.68. We find that the correct inventory is $116,707.75, which results in a correct net income for 1920 of $20,618.48. The respondent determined the deficiency for 1921 on the basis of a total opening inventory for that year of $119,422.62 and a net income of $7,974.87. We find that the correct inventory is $116,707.75, which results in a correct net income for 1921 of $10,689.74. The deficiencies should be redetermined in accordance with the above opinion. Judgment will be entered under Rule 50. MALCOLM & DYER CO., PETITIONER, D. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Docket No. 11769. Promulgated July 24, 1928. Where the Commissioner has based depreciation on an estimated William D. Smith, Esq., for the petitioner. This is a proceeding for the redetermination of a deficiency in income and profits taxes for the calendar year 1920 amounting to $45.50. The petitioner alleged that the Commissioner erred in disallowing a portion of the 10 per cent depreciation taken as a deduction in the calendar year in question. FINDINGS OF FACT. The petitioner is a corporation organized under the laws of the State of Maine. The building, depreciation upon which is the subject of dispute, was built in the year 1910. The nature of the tenancy of the ground upon which the building was erected was one at will as the petitioner could not obtain a lease of the property. The municipal government of the City of Augusta had power at any time to request the petitioner to remove the building, since it was erected over a regular street of the city. It was constructed of wood, with a corrugated iron siding. The cost of the building at commencement of the term over which depreciation is claimed was the basis of arriving at the amount of depreciation to be taken each year. When the building was erected it was erected by a partnership of the same name as the petitioner. The petitioner was organized in 1915, all the assets of the partnership being turned over to the corporation at that time. At the beginning of the year 1920, there had been written off on account of depreciation the total sum of $1,067. At the date of incorporation the total depreciable value set upon the books was $2,860.67. It had become necessary at the time the building was taken over by the corporation to make certain improvements and the basic figure at the date of incorporation was arrived at by taking the entire cost less depreciation to the date on which the corporation had taken it over. No attempt was ever made on the part of the city to require the petitioner to remove the building, although there was some difficulty experienced when it was erected in getting the consent of the proper authorities. While the structure was built over the street, it did not constitute an obstruction to traffic. OPINION. MURDOCK: There is but one issue before the Board in this case and that is one of fact involving the amount of the depreciation allowance to which the petitioner is entitled for the taxable year in question. The statute allows to taxpayers a reasonable allowance for exhaustion, wear and tear, and it has been the practice of the Commissioner in determining this allowance on buildings to estimate the life of the particular building in question and to spread the deduction for depreciation evenly over the period of such estimated life. The petitioner contends that if at the time of incorporation it was determined by reason of the high cost of maintenance or the imminence of removal that the useful life of the property would be shortened, the portion of the cost or other basis of the property |