*819OPINION.
Lansdon:It is impossible to reconcile the figures shown on the exhibits adduced in evidence with the amounts in controversy in this proceeding, but, as counsel for the respective parties have stipulated that the cost of the used cars on hand at December 31, 1919, as shown by the petitioner’s books, was $20,901.79, and that, in its inventory of its stock, the petitioner deducted 25 per cent from such cost, this is not material. The facts are that on December 31, 1919, the petitioner had used cars that had cost it $20,901.79, and that it wrote down such cost on its own books and in its income-tax return to $15,676.34 which, it avers, was the market value of such cars at *820that date. In support of its action it relies on the regulation of the Commissioner, which requires that unsold merchandise on hand at the end of any taxable period shall be inventoried at cost or at cost or market, whichever is lower, and provides that second-hand goods may be inventoried at bona fide selling prices, less cost of selling.
The Commissioner restored the amount written down to the petitioner’s inventory apparently on the theory that it was based on an estimated market value rather than on the cost of replacement at that date. The petitioner admits that the write-down, was its opinion as to selling cost, but asserts that long experience in handling used automobiles had enabled it to form such an opinion with accuracy, and, in this connection, shows that the used cars in question were sold in 1920 for an amount substantially less than $15,676.79.
The statutory provision governing the making of inventories for Federal tax purposes in the Revenue Act of 1918 is as follows:
Sec. 203. That whenever in the opinion of the Commissioner the use of inventories is necessary in order clearly to determine the income of any taxpayer, inventories shall be taken by such taxpayer upon such basis as the Commissioner, with the approval of the Secretary, may prescribe as conforming as nearly as may be to the best accounting practice in the trade or business and as most clearly reflecting the income.
Pursuant to the powers granted in the above section, the Commissioner, with the approval of the Secretary, made and promulgated the rules for inventorying stock in trade, in which the following is included in Regulations 45, as amended by T. D. 3296:
* * * Any goods in an inventory which are unsalable at normal prices or unusable in the normal way because of damage, imperfections, shop wear, changes of style, odd or broken lots, or other similar causes, including secondhand goods taken in exchange, should be valued at bona fide selling prices less cost of selling, whether basis (a) or (b) is used * * *.
The Commissioner interpreted this regulation and applied it in a specific case in A. R. R. 3549, C. B. II-2, p. 35.
The evidence adduced by the petitioner has convinced us that the cost of selling used cars is at least 25 per cent of their sale price. The market value of a used automobile is something very different from the market value of new merchandise. In case of the latter the cost of replacement on the market at date is a fair measure of value, but the cost of replacing a used automobile can not be ascertained. We are of the opinion that the petitioner’s inventory of its used cars at January 1, 1920, is in conformity with the statute and the regulations of the Commissioner and clearly reflects income.
Judgment will be entered after HO days' notice, under Rule 50.