*462OPINION.
Morris:The evidence is clear that the taxpayer’s inventory consisted principally of returned merchandise, inferior in grade due to the inability of manufacturers to secure cotton, damaged in shipment, and unsalable to the general trade, as it was manufactured to tneet the needs of some particular customer. At the close of 1918 the conditions which created the market for inferior twines and cordage had disappeared and the pre-war product was again available. These conditions combined to reduce the market value of the taxpayer’s inventory below cost. We are satisfied that the taxpayer made no arbitrary reductions in its closing inventory for 1918, but that such inventory was taken on the basis of cost or market, whichever is lower, and reflected the market value as of that date. Efforts were made to dispose of the goods on hand immediately after the close of the year, and what few sales were made were below the inventory value set up by the taxpayer. In view of these facts we are of the opinion that the inventory value of $168,532.18 plus the admitted inventory in the Columbia warehouse of $2,319.65 is correct and that the deficiency should be computed upon that basis.
Arundell not participating.