*951OPINION.
Millieen :The evidence and testimony in this cause is most voluminous — hundreds of pages of testimony, much of which is of no value in the determination of the questions at issue, and exhibits galore, including a revenue agent’s report consisting of 96 pages and 17 exhibits.
Concerning the question of the deductibility of bad debts ascertained to be worthless and charged off within the fiscal year ended April 30,1920, we are satisfied that petitioner exercised due diligence and good judgment in the ascertainment of the worthlessness of the debts claimed as a deduction. The petitioner had a large number of accounts on its books. It is operating in an agricultural section of the country. Accordingly, it would be unusual if petitioner had not charged off a small indebtedness here and there which time had shown to have been good when charged off. However, petitioner has dealt fairly with the Government in reporting as income the recovered amounts. There is nothing startling in the inability of the president of the petitioner to testify, five or six years after the date of the charge-off, to minute facts and details as to whether a given farmer might not have had more hogs or cows than petitioner’s agent reported to it at the time the worthlessness of the debts was determined. Based upon all the facts, we are satisfied that petitioner is entitled to the full deduction claimed.
Much testimony was introduced relative to the leases and royalties which Hughes,'Jones, and Payton purchased. It would extend this opinion to an uncalled for length to specify each and every transaction. The respondent considered all the transactions of the three to be the transactions of petitioner, and determined income in each year a sale was made. The evidence is clear that the three parties *952secured loans from petitioner with which to carry on their operations, and the income, if any, resulting from sales of leases and royalties, was the income of the three parties and not that of the petitioner. In the redetermination of the tax due, if any, all such transactions should be excluded.
Petitioner is, no doubt, entitled to take into account, in determining its net income for any given year, the cost of goods sold, and no doubt did sell much of the merchandise of the Duggan-Brown Overland Go. which had not been taken into its inventory. The proof is lacking to support the inventories taken over from the Duggan-Brown Overland Co., and if the petitioner suffers by reason of an inflated income for years subsequent to the consolidation, it must blame itself for not taking the necessary steps to determine the correct inventory. On this issue no error by the Commissioner is found.
Judgment will be entered on 15 days’ notice, under Rule 50.