*2117 Loss on account of abandonment of drawings and patterns determined.
*483 This is a proceeding for the redetermination of a deficiency in income and profits taxes for 1917 in the amount of $24,280.12.
The issue now presented for decision is the amount of the deductible loss on account of the abandonment of patterns and drawings. The issue as to special assessment under section 210 of the Revenue Act of 1917 has been deferred for hearing under Rule 62. The issue as to the statute of limitations has been waived.
*484 FINDINGS OF FACT.
The petitioner is an Alabama corporation, organized in 1887, with its principal office in Birmingham. It has been and is engaged in the machine shop and foundry business including the manufacture of various types of heavy machinery, Corliss engines, sugar mill machinery, etc.
In the manufacture of Corliss engines, sugar mill machinery, Etc., in various types and sizes, detailed drawings and wooden patterns of the different parts were required. From its inception the petitioner made a large number of*2118 drawings and patterns for the different sizes of engines and sugar mills. Early in 1917 the petitioner determined that the manufacture of Corliss engines and certain types of sugar mill machinery and evaporator pans was unprofitable and they accordingly determined at that time to discontinue and abandon the manufacture thereof. On February 1, 1917, the petitioner discarded and entirely abandoned all of its drawings and patterns. The total cost of the patterns was $96,692.75. Those abandoned cost $80,559.50. The March 1, 1913, value of all patterns then in use was not less than the cost. These patterns had a life of 25 years. The patterns, according to the years of acquisition and their cost, were as follows:
| 1899 | $266.20 |
| 1900 | 6,774.90 |
| 1901 | 11,234.85 |
| 1902 | 12,827.10 |
| 1903 | 7,968.40 |
| 1904 | 7,894.15 |
| 1905 | 17,789.80 |
| 1906 | 8,262.10 |
| 1907 | $1,684.10 |
| 1908 | 1,838.10 |
| 1909 | 1,598.30 |
| 1910 | 2,205.50 |
| 1911 | 2,216.30 |
| 1912 | 14,132.95 |
| 96,692.75 |
The drawings which were abandoned cost $80,999.50. These drawings were acquired in the years and at costs as indicated below:
| 1900 | $8,514.00 |
| 1901 | 7,813.00 |
| 1902 | 9,480.00 |
| 1903 | 7,549.00 |
| 1904 | 8,237.50 |
| 1905 | 7,681.50 |
| 1906 | 10,631.00 |
| 1907 | 5,950.00 |
| 1908 | $2,647.00 |
| 1909 | 2,847.00 |
| 1910 | 4,231.00 |
| 1911 | 3,551.50 |
| 1912 | 3,233.50 |
| 82,366.00 |
*2119 Drawings which cost $1,366.50 were not abandoned. The March 1, 1913, value of these drawings was equal to the cost. They had a life of 25 years. The reproduction cost of both the drawings and the patterns in 1913 would have exceeded the cost.
The Commissioner allowed no deduction whatever on account of the abandonment of the drawings and patterns included in taxable income for 1917.
*485 OPINION.
TRAMMELL: Under section 5(a)(4) of the Revenue Act of 1916, as amended by the Revenue Act of 1917, the petitioner is entitled to a deduction for 1917 on account of the abandonment of drawings and patterns based upon cost or the March 1, 1913, value thereof, whichever is lower, less the allowable depreciation from March 1, 1913, until the date of abandonment. The cost and March 1, 1913, value are set out in our findings of fact. This amount should be reduced by the depreciation sustained since 1913. These assets had a life of 25 years from the time of acquisition. Accordingly, in determining the depreciation sustained since March 1, 1913, only the remaining useful life after that date should be considered.
The case will be restored to the calendar for further hearing*2120 under Rule 62(b).