*82 Before MARQUETTE and MORRIS.
This is an appeal from the determination of deficiencies in income and profits taxes for the years 1919 and 1920 in the amount of $11,963.28, and an overassessment for 1918 in the amount of $4,995.68, or a net deficiency of $6,967.60.
The question is whether the net income should be determined on the basis of a calendar year or a fiscal year.
FINDINGS OF FACT.
The taxpayer is a South Carolina corporation with principal office in Bennettsville.
It was organized in 1910 by about 15 farmers, and thereafter engaged in the business of manufacturing fertilizer for use on farms.
The nature of its business was such that practically its entire product was made and sold within the first six months of each year. Most of its sales occurred in April and to a large extent payment was made therefor by notes delivered in June but due in October. The taxpayer engaged in practically no activity during the last six months of each calendar year, outside of the collection of accounts and the purchase of raw materials in preparation for the business*2033 of the following year.
The taxpayer opened a new set of books on January 1 of each year, and for the years 1910 to 1921, inclusive, rendered its tax returns on a calendar year basis.
The annual meeting of the taxpayer was held on July 1 of each year, and for convenience the profit and loss account was ruled down on June 30 of each year to disclose the then book profits. No dividends were declared by the directors until after the collection of the accounts which were reflected in the June 30 profit and loss statement. The directors held their meetings for that purpose at the *83 end of December each year, or just after January 1 of the following year, after the determination of the income for the year then closed.
No accounts of the taxpayer were ruled down at June 30, except the profit and loss account, and no transfer was made to the surplus account until January 1 of each year.
The books of account of the taxpayer were kept on a calendar year basis.
The Commissioner computed the income on the basis of a fiscal year ending June 30 of each year, and determined an overassessment for 1918 of $4,995.68 and aggregate deficiencies for 1919 and 1920 of $11,963.28, *2034 or a net deficiency of $6,967.60.
DECISION.
The tax should be computed on the basis of calendar years. Final determination will be settled on 10 day's notice, under Rule 50.