*4208 Amount of an accrued liability to salesmen for commissions determined.
*1 This is a proceeding for the redetermination of a deficiency in income and profits taxes for the year 1919 in the amount of $667.86. The only issue is whether petitioner was entitled to set up an accrued liability of $2,000 for commissions alleged to be a liability to salesmen during the year 1919 in ascertaining the net taxable income for that year.
FINDINGS OF FACT.
During the year 1919 petitioner was a corporation employing salesmen upon a commission of 10 per cent of sales, the custom of petitioner being to pay such commission upon the 10th day of each month for all orders taken by each salesman and accepted by the credit department of petitioner during the preceding month. If there were any justified returns made by customers, the commissions on such goods were charged back to the salesman. No adjustment was made in salesmen's commissions because of canceled orders.
Each salesman had a drawing account and if sufficient orders were not obtained to cover*4209 such account, the account was carried along until the salesman made it up. The account of each salesman as carried on the books of petitioner, showed, on the one side, his drawings, and on the other side, his commissions. Credits were made to each salesman on the 10th of the following month, and if the credits exceeded the amounts drawn by him, he would be given a check for the excess. If the amounts drawn exceeded the credits for commissions, *2 the salesman's account would be carried until there was an amount due him. At the end of 1919 no part of the commissions in question was credited to salesmen on the books of the petitioner.
During the month of January, 1920, an auditor for petitioner made the following entries upon the private journal of petitioner.
| Commissions | $2,000 | |
| To Commissions Accrued | $2,000 | |
| For estimated commissions due salesmen on 1919 business. |
Orders for merchandise totaling $8,210.45 were taken by salesmen of the petitioner during 1919 and were accepted by petitioner. Substantially all, if not all, of such orders were taken for shipment to the customers in 1920 and were not taken into the sales account of the petitioner*4210 until shipment.
OPINION.
SIEFKIN: The evidence in this proceeding is unsatisfactory to prove that petitioner's action in setting up estimated commissions to salesmen in the amount of $2,000 was reasonable. The action of the auditor of the company in his estimate must depend upon the approximate accuracy of that estimate, under our decision in . He testified that in January, 1920, he arrived at the estimate from orders which had been accepted and orders pending not yet accepted. The original orders upon which his estimate was based were introduced in evidence but the orders bearing stamps showing dates of acknowledgment or acceptance in December, 1919, totaled only $8,258.45. It is obvious that the orders accepted before December, 1919, can not be considered because it must be assumed that settlement was made at least by December 10, 1919, on such orders in accordance with the custom of the company which we have found. It is equally clear that orders accepted in 1920 can not constitute an accrued liability in 1919, since, until acceptance, there was no liability. From the evidence we are only able to determine that petitioner*4211 had an accrued liability to salesmen for commissions at the end of 1919 in the amount of $821.04, and should be allowed to deduct that amount in determining net taxable income for 1919. .
Judgment will be entered on 15 days' notice, Under Rule 50.