*919OPINION.
Morris:The petitioner concedes that the adjustment made by the Commissioner in the general merchandise inventory at the close of the year 1920 results in a restatement of that inventory at actual *920cost, and that the adjustment is, therefore, proper. It disputes the correctness of the adjustment made by the Commissioner in the bean and grain inventory, and contends that its net income for the year 1920 has been overstated in the deficiency letter, because of the use of the adjusted inventory.
Prior to the year 1920 it was the petitioner’s practice to value its bean and grain inventory upon the basis of market. For the year 1920 it elected to value its inventory upon the basis of market, since the total of the inventory valued at market was lower than the total thereof when valued at cost; and, so far as the basis of valuation is concerned, this constituted no change from the basis adopted for prior years. The 1919 bean and grain inventory, which was also the opening bean and grain inventory of the year 1920, was valued on the basis of market, and this is true of the bean and grain inventory at the close of the year 1920.
Therefore, the bean and grain inventories at the beginning and close of the year 1920 were uniformly and consistently valued by the petitioner upon the same basis. The Commissioner rejected the petitioner’s inventory valuations and redetermined the inventories upon an alleged cost basis. But an examination of the Commissioner’s computations discloses the fact that in reality he has valued the opening inventory upon the same basis and in the same amount as that of the petitioner, while the closing inventory has been valued upon the basis of average cost figures which were placed in the inventory sheets by the petitioner for the purposes of comparison. The Commissioner’s opening inventory is valued at market; his closing inventory is valued at average cost.
The adjustment which the Commissioner has made in the bean and grain inventory for the year 1920 results in a distortion of the income of that year, as well as of the year immediately following, because of his failure to treat the opening and closing inventories upon a uniform and consistent basis. No better illustration of this could be had than that afforded by comparison of the results obtained through the use of the petitioner’s inventories and those resulting through the use of the Commissioner’s inventories. According to the computations of both parties, the combined result of operations for the two years 1920 and 1921 is a net loss of approximately $21,000. Using the petitioner’s inventories, a net loss is shown for both years in the approximate amounts of $8,000 and $19,000, respectively; while the results obtained through the use of the Commissioner’s inventories are a net profit of approximately $21,000 for the year 1920, and a net loss of approximately $48,000 for the vear 1921.
*921The inventory practice of the petitioner is undoubtedly faulty, but it can not be said that net income has not been clearly and correctly stated in the return because of the use of those inventories. The opening and closing inventories of the year 1920 have been determined by the petitioner according to a uniform basis of valuation. The error in the basis of valuation is present in both inventories, thus preventing any distortion in the net income for that year. On the other hand, the Commissioner, by accepting petitioner’s opening inventory for the year 1920 and restating the bean and grain inventory, at the close of the same year, at cost, has retained the error in the petitioner’s basis of valuation so far as it affects the opening inventory and eliminated it as it affects the closing inventory. The result necessarily is a distorted net income.
We were confronted with a like situation in the Appeals of The Thomas Shoe Co., 1 B. T. A. 124, and The Buss Co., 2 B. T. A. 266, and what we said in our decisions in those cases is equally applicable to the facts in this. In the first mentioned case, we held that “ Even if the entire practice of the taxpayer had been erroneous, * * * the Commissioner clearly erred in insisting upon a change in method at the close of the year without making and allowing a compensatory change at the beginning ”; and, in the last mentioned case, we stated : “ However faulty the taxpayer’s inventory method was, we believe that greater weight should be given to consistency than to any particular method of inventorying or basis of valuation so long as the method or basis used substantially reflects the income.” And in both cases we held that “ What the inventory practice is, is of some importance; that the practice should be uniform is of the highest importance.”
The value of the general merchandise inventory is $67,018.85, and the value of the bean and grain inventory is $37,897.09. The total value of petitioner’s inventories at the close of the year 1920 is $104,910.94, and the net income for 1920 should be redetermined accordingly.
Judgment will he entered), upon 10 days’ notice, under Bule 50.