*31OPINION.
Giucen :The Standard Refractories Co. contends that it is entitled to a deduction under the provisions of section 234 (a) (8) of the Revenue Act of 1918, which provides for the deduction of a reasonable allowance for the amortization of facilities constructed, erected, installed, or acquired, on or after April 6, 1917, for the production of articles contributing to prosecution of war against the German government. The Commissioner bases the disallowance of this deduction upon three grounds;
(1) The petitioner was not actively engaged in the manufacture of articles which contributed directly to the prosecution of the war.
(2) Facilities which the petitioner ordered or contracted for, or for which it made definite commitments, prior to April 6, 1917, though actually constructed, erected, installed, or acquired, on or after that date, and used for the production of articles contributing to the prosecution of the war, are not facilities acquired for the production of articles contributing to the prosecution of the war within the meaning of the provisions of section 234 (a) (8) of the Revenue Act of 1918.
(3) Facilities for which there may not have been any definite commitments prior to April 6, 1917, but which were acquired in pursuance of a plan of expansion determined and entered upon prior to that date, are not facilities acquired for the production of articles contributing to the prosecution of the war within the meaning of the provisions of section 234 (a) (8) of the Revenue Act of 1918.
Section 234 (a) (8) of the Revenue Act of 1918 reads as follows:
(8) In the case of buildings, machinery, equipment, or other facilities, constructed, erected, installed, or acquired, on or after April 6, 1917, for the production of articles contributing to the prosecution of the present war, and in the case of vessels constructed or acquired on or after such date for the transportation of articles or men contributing to the prosecution of the present war, there shall be allowed a reasonable deduction for the amortiza*32tion of such part of the cost of such facilities or vessels as has been borne by the taxpayer, but not again including any amount otherwise allowed under this title or previous Acts of Congress as a deduction in computing net income. At any time within three years after the termination of the present war the Commissioner may, and at the request of the taxpayer shall, reexamine the return, and if he then finds as a result of an appraisal or from other evidence that the deduction originally allowed was incorrect, the taxes imposed by this title and by Title III for the year or years affected shall be redetermined and the amount of tax due upon such redetermination, if any, shall be paid upon notice and demand by the collector, or the amount of tax overpaid, if any, shall be credited or refunded to the taxpayer in accordance with the provisions of section 252.
The Commissioner at the hearing did not seriously contend that the petitioner was not actively engaged in the manufacture of articles which contributed directly to the prosecution of the war. The evidence upon this point is so clear and convincing that we have not thought it necessary to set it forth in detail in our findings of fact, and we are convinced that the petitioner was entirely engaged in the manufacture of articles contributing directly to the prosecution of the war. Since the petitioner was so engaged, we must hold that it is entitled to a' reasonable allowance for the amortization of such facilities as it constructed, erected, installed, or acquired after April 6, 1917, for the production of silica brick, which were articles contributing to the prosecution of the war.
The right of a taxpayer to an amortization deduction with respect to facilities constructed, erected, installed, or acquired, on or after April 6, 1917, though ordered or contracted for prior to that date, and the right to the same deduction with respect to facilities acquired on or after such date pursuant to a plan of expansion determined upon and entered into prior to that date, has heretofore been considered by the Board. Both of these questions were decided in the Appeal of Manville Jenekes Co., 4 B. T. A. 765. The arguments and contentions advanced by the Commissioner in this case are identical with those advanced by him in the Manville Jenekes case, and, in accordance with our decision in that case, we hold that the petitioner herein is entitled to an amortization deduction upon facilities acquired on or after April 6, 1917, for the production of articles contributing to the prosecution of the war, notwithstanding the fact that some or all of such facilities may have been ordered or con.tracted for prior to that date, or that some or all of such facilities may have been acquired pursuant to a plan of expansion determined upon and entered into prior to such date.
Section 234 (a) (8) of the Revenue Act of 1918 provides “ that there shall be allowed a reasonable deduction for the amortization of such part of the cost of such facilities or vessels as has been borne by the taxpayer.” Nowhere in the Revenue Act is there any provi*33sion with reference to the method of ascertaining the amount of this deduction. The Commissioner'has provided in his regulations as regards property the use of which was not limited to the period pf its operation as a war facility, that the deduction shall be the difference between the cost and the value of the property, which value “ shall be the estimated value to the taxpayer in terms of its actual use or employment in his going business,” with other limitations not here material. By common consent the parties hereto have presented this appeal upon the theory that the amount of the deduction to which the petitioner is entitled shall be determined in the light of the regulation, and neither has contested the correctness of the regulation in so far as it purports to outline the method for ascertaining the amount of the deduction. The disagreement between the parties here is as to the value in use of the amortizable facilities.
In the Appeal of Banna Manufacturing Co., 1 B. T. A. 1037, we said:
Taxpayers who produced, articles contributing to the prosecution of the late war and. who, on or after April 6, 1917, erected, installed or acquired buildings, machinery, equipment or other facilities for that purpose, are entitled to deduct from gross income, under section 234(a) (8) of the- Revenue Act of 1918, the difference between- the cost of such buildings, machinery and equipment, and their actual sale price or fair market value when discarded, with proper allowance for depreciation while used, or, if they are still in use, their value . to the taxpayer in terms of their use or employment in its going business.
In the Appeal of the Kirk Coal Co., 3 B, T. A. 755, in considering the evidence as to the amount of the deduction to which the taxpayer is entitled, it was said:
That the assets upon which amortization is claimed were employed in the business subsequent to the termination of the amortization period is clear, but no evidence has been presented to show the extent to which they were so employed, or the actual or estimated cost of the replacement of these assets under normal postwar conditions.
In considering a similar question in the Appeal of the Greenville Coal Co., 3 B. T. A. 1323, we said:
Taxpayer claimed amortization on the tenant houses erected’ by it during the war period. The' record discloses the fact that those tenant houses have been used by the taxpayer -since the close of the war. Neither the exact amount or comparative value of such use, nor the actual or estimated cost of replacing them under normal postwar conditions, is disclosed. It may be that taxpayer is entitled to some amortization on account of materially diminished useful value, but, because it is disclosed' that those hodses have' been and still are used,’ it is evident that they did not lose their entire useful value, and (here are no facts in the record that will enable the Board to determine’ to what extent their useful value was impaired. We , therefore approve, the determination of the .Commissioner on that-issue.
*34Again, in the consideration of a similar question in the Appeal of Standifer Construction Corporation, 4 B. T. A. 525, at page 555, we said:
The use to which facilities are put by a taxpayer during the amortization period as compared to the use to which they were put in the postwar period may bo taken into consideration in determining the gross amount of the amortization deduction which is to be spread over the different taxable years, * * *.
In the Appeal of Manville Jenckes Co., supra, p. 796, the petitioner and the Commissioner were in agreement as to the fundamental proposition “that capacity and production must be considered in some kind of a comparison in arriving at a determination as to the value in use of amortizable facilities.”
In this appeal the Commissioner does not agree that the deduction is to be measured by the postwar production and its relation to the prewar production, and we are thus called upon to determine whether the evidence adduced by the petitioner herein as to its production of brick before, during, or after the war, may be used as the measure of the value in use of the amortizable facilities and the amount of the deduction ascertained thereby. It should be noted that, while there was some testimony as to the extent to which the facilities were used after they were acquired by the General Refractories Co. following its acquisition thereof and the dissolution of the petitioner, such testimony is of little value and that, so far as the petitioner is concerned, the only evidence introduced by it bearing upon the value in use of its amortizable facilities in its normal postwar business, is that relating to the physical use of the facilities during the postwar period prior to October, 1922, that being the time when its capital stock was sold to the stockholders of the General Refractories Co.
The petitioner asserts that by this evidence it has established that its production of finished burnt brick during that portion of the postwar period between January 1, 1919, and August 31, 1922, was but 51.74 per cent of its production during the war period commencing April 6, 1917, and ending December 31, 1918, and contends that the value in use of its amortizable facilities is but 51.74 per cent of their original cost and asks us to find that it is entitled to an amortization deduction in an amount equal to 48.26 per cent of the cost of these facilities, which cost was $238,305.79. If we assume that the physical use to which the amortizable facilities were put in the normal peace-time business was but 51.74 per cent of their use during the war period, it does not necessarily follow that the value of these facilities to the petitioner is but 51.74 per cent of their original cost. Undoubtedly this is a factor which should be considered in determining what amount should be allowed as a *35reasonable deduction for amortization, but at best it is but one of the several factors. The cost of replacement, during the postwar period, of the same or other facilities which would produce the same results; any improvements or radical changes in the facilities; the salvage value of such facilities; their selling price if they have been sold; a proper discount for excess facilities which may be used because they are on hand but which in the ordinary conduct of the business would have been acquired only in the future; and all other similar factors, depending upon the facts in the particular case, must be considered in determining the amount of the deduction.
The evidence discloses that the General Refractories Co., in October, 1922, acquired all of the petitioner’s outstanding capital stock; that shortly thereafter it took over all of the petitioner’s assets including such of the amortizable facilities as remained on hand, and that the petitioner corporation was then dissolved. The evidence does not disclose the purchase price paid for the stock, and it is contended that this fact is not material and that it has no bearing upon the value of the petitioner’s assets at the time of the transaction. It seems to us that such facts are material and that, had we been advised of the price paid for this stock and of other factors bearing upon the value of the petitioner’s assets, we would have had facts which would have aided materially in the determination of the amount of the deduction. We are constrained to hold that the value in use of the petitioner’s amortizable facilities can not be measured or determined solely on the basis of postwar physical use; that the evidence here adduced is not sufficient to enable us to determine the value in use of the amortizable facilities; and that we can not compute or determine the amount of the deduction to which the petitioner is entitled.
Prior to 1919, under an accounting practice consistently adhered to, the petitioner had charged to expense all purchases of spare parts for the repair of the plant equipment. In 1919 a change in the method of accounting for supplies of this nature was adopted, which contemplated that purchases should thereafter be charged to an inventory account and written off to expense only as the supplies were withdrawn from stores and actually used. To correct the accounting records so that they would conform with this new accounting practice, the petitioner inventoried all supplies of this nature on hand at January 31, 1919, all of which had previously been charged to expense, and by journal entry of that date recorded the cost thereof, the sum of $10,576.74, on its books by charges to inventory accounts and a credit to surplus. This item of $10,576.74 was included by the petitioner in net income for the year 1919, but a nota*36tion on the return contained a claim that at least $5,000 of this amount should be exempt from tax at the minimum cost of spare parts which had been purchased in prior years. The Commissioner held that the entire amount of $10,756.74 was income for the year 1919. The issue is not a difficult one and is easily disposed of. Obviously, the petitioner could not realize any -income from a mere book entry recording in its accounts the cost of supplies on hand which had been purchased in prior years and charged to expense in those years. The income of the year 1919 was not affected in the least by this entry. Its sole purpose was to bring the books of account into conformity with the new system of accounting for spare parts. No part of the item in question constitutes income for the year 1919.
Judgment will be entered on 15 days’ notice, under Bule 50.
Milliken did not participate.