*289OPINION.
Lansdon:Four questions are presented in this appeal: (1) Whether the Commissioner erred in disallowing depreciation on used cars that were a part of the taxpayer’s stock in trade during the year in question; (2) whether the adjustment of invested capital of the taxpayer made by the Commissioner is in accordance with the facts and the law; (3) whether the Commissioner’s decision as to the cost of merchandise sold by the taxpayer during the year ended December 31,1920, was correct, and (4) whether the taxpayer was entitled to deduct $545.10 for bad debts charged off during the year. .
The Commissioner was right in disallowing depreciation on used cars owned by the taxpayer as a part of its stock in trade and not used in the operation of its business. Decreases in value of merchandise are reflected in the taxpayer’s closing inventory in which all articles of merchandise must be included either at their cost or at cost or market value, whichever is the lower.
The Commissioner correctly adjusted the taxpayer’s invested capital for the year ended December 31, 1920, since he applied the con*290trolling provisions of the statute, section 331 of the Revenue Act of 1918, to the facts so set forth in the income-tax return of the taxpayer for the year in question, which is as follows:
In the case of the reorganization, consolidation, or change of ownership of a trade or business, or change of ownership of property, after March 3, 1917, if an interest of control in such trade or business or property of 50 per centum or more remains in the same persons, or any of them, then no asset transferred or received from the previous owner shall, for the purpose of determining invested capital, be allowed a greater value than would have been allowed under this title in computing the invested capital of such previous owner if such asset had not been so transferred or received: Provided, That if such previous owner was not a corporation, then the value of any asset so transferred or received shall be taken at its cost of acquisition (at the date when acquired by such previous owner) with proper allowance for depreciation, impairment, betterment or development, but no addition to the original cost shall be made for any charge or expenditure deducted as expense or otherwise on or after March 1, 1913, in computing the net income of such previous owner for purposes of taxation.
The third point involved in this appeal is whether the Commissioner erred in denying the. taxpayer the right to use its own opening inventory as of January 1, 1920, in computing the cost of merchandise sold by it during the year ended December 31, 1920. In taking its closing inventory on December 31, 1919, the partnership, following good accounting practice and in conformity with the law and the regulations of the Commissioner, listed all merchandise then in stock at cost or market price whichever was lower. The taxpayer contends that the actual cash value of the merchandise which it purchased from the partnership on January 1,1920, was $31,164.64, based on the market prices for that day, and that, therefore, it had the right to enter that amount as the total of is merchandise inventory as of that date on its books of account, and to use the amount so determined and entered in computing the total cost of all merchandise sold by it during the year in question.
The Board is of the opinion that the taxpayer had the legal right to use the actual proved cash value of the merchandise purchased by it from its predecessor as a proper inventory entry in its accounting and in computing the cost of merchandise sold by it in the business operations of its first taxable year. The Commissioner was wrong in his denial of this right on the authority of section 331 of the Revenue Act of 1918, which merely lays down the rule for the ascertainment of invested capita], but does not deal with the question of the value that a corporation may put on the merchandise that it purchases from a predecessor partnership whether the value fixed is actual cost to the partnership or otherwise.
In the case at bar the only evidence the taxpayer offered to prove ifcg contention that merchandise purchased from its predecessor had the actual cash value claimed is its own income-tax return for the year ended December 3.1, 1920. Among other statements and schedules this return includes: (1) The balance sheet of the partnership as of December 31,1919; (2) the balance sheet of the taxpayer as of January 1, 1920; (3) the balance sheet of the taxpayer as of December 31, 1920, and (4) a statement by the president of the taxpayer asserting that the actual cash values of all the property purchased from the partnership on January 1, 1920, were used in making up the balance sheet of the taxpayer as of that date. The Board has *291considered tbe meager evidence offered by the appellant, and holds that it is-insufficient to prove the actual cash value of the merchandise purchased from the partnership on January 1, 1920. In the absence of proof of any other value the Commissioner, who had the same evidence before him that was offered in the hearing before the Board, was right in requiring the taxpayer to use the closing inventory of the partnership in computing the cost of merchandise sold by it during the year ended December 31, 1920.
The Commissioner admits error in disallowing the amount of $545.10, deducted from income by the taxpayer as bad debts ascertained to be worthless and charged off during the year for which the return was made.