*4193 1. The March 1, 1913, value of certain tracts of land determined as a basis for determining the gain or loss from the sale of such land during the fiscal year ended March 31, 1920.
2. The fact that petitioner's books do not reflect the appreciation in the value of land owned prior to March 1, 1913, does not preclude petitioner from proving the true value on that date for the purpose of establishing the amount of gain or loss upon sale in 1919.
3. Book entries are not conclusive proof of value on March 1, 1913.
*81 In this proceeding the petitioner appeals from the determination of a deficiency in income tax for the fiscal year ended March 31, 1920, in the amount of $12,689.98. The deficiency is alleged to arise from the action of the respondent in making no allowance for a March 1, 1913, value of various tracts of land, as a basis for determining the gain or loss upon the sale of the land by petitioner during the fiscal year March 31, 1920.
FINDINGS OF FACT.
The petitioner is a Montana corporation, with principal office at Hamilton. *4194 Its business is general farming and stock raising. For some 10 years or more prior to 1913 petitioner owned approximately 16,000 acres of irrigated and unirrigated farm lands in Ravalli County, Montana. Included in this total acreage was a tract of *82 about 8,000 acres lying in the vicinity of the City of Hamilton. The 8,000-acre tract consisted of lands of the same general nature, for the most part irrigated, the higher and lower portions of which varied only to the extent of about 25 feet. This land was adapted to the raising of grain, farm produce, and grazing. From 1912 to 1914 land of this character near Hamilton was in demand and petitioner in those years made many sales of its lands from this 8,000-acre tract. The various sales during those years comprised about 2,500 acres and consisted of small tracts of land ranging from a few acres each to large tracts of several hundred acres, at prices ranging from $20 to $250 per acre.
During the fiscal year ended March 31, 1920, petitioner sold various tracts of land from that remaining portion of its acreage previously described as the 8,000-acre tract. These sales were six in number and comprised land with an acreage*4195 of 1,958.19 acres which sold for a total contract price of $131,032. In addition to these six sales of land, petitioner also sold during the fiscal year 1920 a town lot in the City of Hamilton for $750. The details covering the sales in question are as follows:
| No. | Date of sale | Purchaser | Acres sold | Price per acre | Sale price |
| 1 | June, 1919 | C. I. Hartson | 500.00 | $70 | $35,000 |
| 2 | 1919 | J. H. Davis | 203.71 | 74 | 15,200 |
| 3 | Aug. 1919 | W. R. Woodson | 496.71 | 55 | 27,429 |
| 4 | Aug. 1919 | J. E. Richli | 745.77 | 65 | 52,203 |
| 5 | Jan. 1920 | Lagerquist | 2.00 | 500 | 1,000 |
| 6 | Feb. 1920 | O'Connell | 10.00 | 20 | 200 |
| 1958.19 acres. | 131,032 | ||||
| 7 | Aug. 1919 | Beach | Town lot. | 750 | |
| Total gross sale price | 131,782 |
The Hartson tract contained no buildings. The Davis tract contained no buildings. This was bench land and carried water rights. The Woodson tract contained no buildings. This was bench land, rather rolling, and had no bottom land. The Richli tract contained some buildings in 1913 and at time of sale in 1919. The Lagerquist tract consisted of a manufacturing site near Hamilton. The O'Connell tract consisted of pasture land.
The tracts*4196 of land in question were carried on petitioner's books from the time of organization in 1901 to the time of making the various sales at a value of $34,102.63. Petitioner in making the sales of $131,782 incurred expenses, etc., totaling $20,207.80. When petitioner made its income-tax return for the fiscal year ended March 31, 1920, it considered the seven parcels of land sold during that fiscal year to have had a value at March 1, 1913, equal to the sales price *83 received for the land in 1920. Petitioner reported in its return an amount of $77,471.57 as representing the difference between the gross sales price, less expenses, etc., and the book value; this difference of $77,471.57, however, was not included in its taxable income but reported as carried to "surplus."
In auditing the petitioner's return for the fiscal year ended March 31, 1920, the respondent made no allowance for a March 1, 1913, value, but determined that the amount of $77,471.57 represented the total gain derived from the sales that year, basing his determination on the book values of the lands sold.
OPINION.
VAN FOSSAN: The sole question to be determined in this appeal is the value of the seven*4197 tracts of land owned by the petitioner on March 1, 1913.
The depositions of four witnesses were introduced in evidence in behalf of petitioner. Each of these witnesses, qualified by virtue of his experience and knowledge of the properties here in question, gave opinion testimony concerning the value of the various tracts of land as of March 1, 1913. At the hearing petitioner's general manager, Charles A. Crawford, who had held that position from some years prior to 1913 to the present time, and who had personal knowledge of all the sales of land by petitioner, gave opinion testimony concerning the value of the various tracts of land in question as of March 1, 1913, supporting his testimony by reference to numerous sales of similar land. Each of these five witnesses was of the opinion that the March 1, 1913, value of the seven tracts of land was greater than the sale price in 1919 or 1920. This decrease in value was attributed in part to general 1919 conditions, but more to the fact that from 1912 to 1914 there was a land boom in this particular section.
No contradictory evidence was furnished by the respondent with respect to the March 1, 1913, value of the tracts of land*4198 in question, but it was contended that the value at which the land was carried by petitioner on its books, namely, $34,102.63, should be used as the basis for determining the gain or loss on the lands sold during the fiscal year 1920. The mere fact that the increase in value had not been entered upon petitioner's books does not preclude proof of March 1, 1913, value. Book entries are not conclusive. .
Upon the uncontroverted evidence in the case, we are of the opinion that the property designated as the 1,958.19 acres of land had an average value at March 1, 1913, of at least $70 per acre, and that the property designated as the town lot had a value at March 1, 1913, of $750. It follows that upon its sale during the fiscal year *84 ended March 31, 1920, for an aggregate sum of $131,782 no profit was realized.
Judgment will be entered on 15 days' notice, under Rule 50.