*544 The petitioner seeks redetermination of deficiencies in income tax determined by the respondent in the following amounts:
| 1923 | $2,942.49 |
| 1924 | 9,013.72 |
| 1925 | 7,203.81 |
An original and two amended petitions were filed, leaving the petitioner's allegations of error as follows: (1) An amount of $1,385.28, interest earned in 1922, has been included in income for 1923, thus overstating income; (2) ordinary and necessary expenses, taxes and salaries in the following amounts have been disallowed as deductions: for 1923, $11,397.72; for 1924, $9,417.44; for 1925, $3,654.96; (3) accrued commissions upon the sale of city lots in the Sherwood Forest Subdivision due by the petitioner to its agents have been disallowed as deductions in the following amounts: In 1923, $111,297.97; in 1924, $123,175.93; (4) income is overstated due to the fact that the respondent has included therein the following amounts of profits realized from sales of real estate, whereas only a portion thereof is income: in 1923, $50,000.03; in 1924, $97,031.46; in 1925, $98,992.56; *1507 (5) the following amounts of interest were included by the respondent in income whereas only portions thereof were actually income: in 1923, $14,457.31; in 1924, $37,230.63; in 1925, $49,345.86; (6) income has been overstated by the inclusion as collections on installments of $6,140 in 1924 and $4,385.81 in 1925 of purchase money second mortgages accepted in lieu of land contracts; (7) the respondent disallowed deductions in each of the taxable years of additions to a reserve for perpetual care of the cemetery; (8) in computing the taxable income from the sale of cemetery lots in each of the taxable years, the proper and correct fair market value of the lots as of March 1, 1913, has not been considered by the respondent; (9) with respect to 1924 and 1925 the respondent failed to allow net losses forwarded from 1923 and 1924.
FINDINGS OF FACT.
The petitioner is a corporation, organized and incorporated in 1905 under the laws of Michigan, with its principal place of business at Detroit, and is engaged in the businesses of owning and conducting a cemetery and of subdividing land into building lots and selling lots to the public. Both businesses are conducted for profit.
Under*1508 date of January 2, 1923, the petitioner and Manly D. Davis, as trustee, entered into an agreement in writing with Arthur J. *545 Stewart and Frank D. Fry, doing business as Stewart and Fry, providing, so far as is material here, as follows:
1. It is understood and agreed that all contracts heretofore made and existing between the parties, with reference to the sale of lots in Sherwood Forest Subdivision, are hereby cancelled and superseded.
2. First parties give second parties an exclusive agency and exclusive right and license to sell all unsold lots owned by first parties and held by said Trustee in the Sherwood Forest Subdivision, DetroitMichigan, the numbers of which lots and the prices at which said second parties are authorized to make sales thereof, being set forth fully in Schedule "A" hereto attached. The sale prices of said lots may be modified only by consent of the President of the Evergreen Cemetery Association and second parties, except that lots abutting on the Cemetery may be sold at any price not less than forty-five ($45.00) dollars per foot, which may be deemed advisable by second parties.
3. First parties shall finance all improvements as rapidly*1509 as possible, consisting of paving, walks, sewers, etc., as enumerated in land contract, to be used in the sale of said lots, copy of which, marked exhibit "B" is hereto attached. Said financing shall be either by direct contract and payment therefor or by or through having the City make said improvements. First parties will pay for such improvements, or if made by said City, all taxes now or hereafter assessed therefor, and when so paid, the amounts expended by first parties shall become a part of first parties' investment as hereinafter referred to, and shall draw interest at the rate of six (6%) per cent per annum until repaid to first parties. Application for the various improvements referred to in this paragraph, shall be made to the City of Detroit from time to time by first parties upon request from second parties.
4. That the investment of said first parties as of December 31st, 1922, in said Subdivision, including lots heretofore sold on contract, which are included in this agreement, shall be deemed to be three hundred twenty-five thousand (325,000) dollars as shown by Schedule "C", plus one-half (1/2) of the taxes accruing and paid thereon by first parties from September, *1510 1919, to November 30th, 1922, less such payments on the principal on lots heretofore sold as have been received by the first parties, and also less moneys in first parties' hands in the so-called improvement fund, after there shall have been paid to Davey upon the surrender of his twenty (20) land contracts, the sum of money received by first parties thereon, amounting to twenty-three hundred ($2300) dollars, more or less.
5. Three hundred thousand ($300,000.00) dollars of said investment, plus one-half (1/2) the taxes accruing and paid thereon from September, 1919 to November 30th, 1922, less the amounts heretofore and hereafter paid on principal as received by first parties, shall bear interest at the rate of six (6%) per cent per annum from the thirty-first day of December, 1922. The balance of said investment shall bear interest as and when sufficient lots have been sold in excess of three hundred thousand ($300,000.00) dollars, to cover any part or parts of same, but only to the extent that such contracts on such lots sold cover such part of said balance of investment.
6. All further moneys expended by first parties for investments after January 1st, 1923, as provided*1511 in Paragraph Three, and including 1922 State and County Taxes, shall bear interest at six (6%) per cent until repaid or liquidated.
7. Second parties shall devote their best energies, personally and through the employment of agents and salesmen for the sale of such lots, and agree to sell on or before December 31st, 1923, not less than fifty (50) lots; on or before *546 December 31st, 1924, sufficient additional lots to bring the total sales for the years 1923 and 1924 up to one hundred (100) lots * * *.
8. The form of contract to be used shall be the one hereinbefore referred to, which shall be executed by Manly D. Davis, Trustee, and said Stewart and Fry as first parties, and shall provide for the payment of not less than ten (10%) per cent down and subsequent payments of not less than one (1%) per cent monthly, with the entire balance due in five (5) years after the respective dates of contracts. Said contracts shall bear interest at six (6%) per cent per annum, included in said payments.
* * *
10. It is understood that on all sales of lots in Sherwood Forest made by second parties prior to January 1st, 1923, a commission of ten (10%) per cent has been figured*1512 or allowed for by said Stewart and Fry, and that one-half of all payments received on said contracts has been applicable thereto. It is therefore agreed that on all ots upon which less than twenty (20%) per cent of the contract price has been paid, one-half (1/2) of all payments hereafter received thereon until the total payments shall reach twenty (20%) per cent on each contract, shall be retained by said second parties for said commissions.
11. On all payments hereafter received upon contracts bearing date prior to January 1st, 1923, said Stewart and Fry shall receive for collection fees five (5%) per cent of such payments when made and received.
12. For all sales made after January 1st, 1923, including sales to themselves as hereinbefore provided, and resales of forfeited lots, second parties shall receive in full for commissions and collection fees, fifteen (15%) per cent payable as follows: eighty (80%) per cent of the first down payment and one-half (1/2) of all subsequent monthly payments thereon until said fifteen (15%) per cent commission shall have been paid in full to and received by them.
* * *
14. All profits derived from the sale of said lots shall be divided*1513 one-half to first parties and one-half to second parties.
15. At all times after one hundred (100) lots are sold on contract, as provided in paragraph 7 when the aggregate contracts for sale of lots outstanding shall exceed by twenty-five (25%) per cent, the total of first parties' investment not repaid, the proceeds from the sale of additional lots shall be divided one-half (1/2) to first parties and one-half (1/2) to second parties.
* * *
17. Contracts heretofore and hereafter made, upon which one-quarter of the total purchase price, plus one-quarter of the cost of improvements, where such cost of improvements is not included in said purchase price, has been paid, shall at the option of either party, be treated as cash in the reduction of the amount of said investment, and when so treated, shall be freed from the operation of this contract, excepting that such contracts shall be collected by second parties and shall be subject to the payment to second parties of all commissions and collection fees as hereinbefore provided.
18. First parties also agree to deed any lot to purchaser upon which one-half (1/2) of the purchase price has been paid, exclusive of taxes for improvements, *1514 provided said purchaser will assume, in said deed, any such outstanding taxes, give a mortgage for balance due, pay mortgage tax and the recording fees therefor. Such payments and mortgages shall be treated as between the parties hereto as full cash collections and payments upon such contracts.
*547 Manly D. Davis was secretary of the petitioner and not in fact a trustee. For the sake of convenience, certain operations of the petitioner were carried on its books in the name of Davis as "trustee."
In January, 1923, the petitioner entered upon its books an amount of $1,385.28 income from interest earned and collected in 1922 in connection with the sale of lots and this interest was closed into profit and loss account for 1923. In determining the deficiency for 1923 it has bee included in taxable income.
The petitioner kept its accounts on the double entry system and accounted separately for the cemetery and the subdivision transactions. The accrual basis was employed in the cemetery accounts; with respect to the subdivision accounts, the income from interest on contracts was entered when collected and it was not accrued; the income from sales of building lots prior*1515 to January 1, 1923, was accounted for as "realized" or deferred as "unrealized"; in 1923 and subsequent years the income from sales of building lots was accounted for on the accrual basis, except that income from interest was reported when actually collected. Beginning with January 1, 1923, a separate set of books was opened and thereafter maintained, which reflected the transactions according to the provisions of the contract with Stewart and Fry, the so-called "profits" being determined upon the basis of the agreed investment value of the building lots and improvements. A separate account was kept in 1923 and thereafter for each lot, showing the designating number thereof, the selling price, name and address of purchaser, down payment and each subsequent payment collected, together with the date of each transaction.
The so-called profits and the disposition thereof were accounted for upon these books as follows:
| Item | 1923 | 1924 | 1925 |
| Balances due Jan. 1, 1923, on sales prior thereto | $137,395.71 | ||
| Sales of current year | 379,100.00 | 528,300.00 | $75,300.00 |
| 516,495.71 | |||
| Less contract basis "cost" of prior sales | 88,998,27 | ||
| Of current year sales | 154,708.77 | 226,125.65 | 38,514.72 |
| Remainder, so-called "gross" profit on sales | 272,788.67 | 302,174.35 | 36,785.28 |
| Income from interest collected on sales contracts | 14,473.96 | 37,241.39 | 49,124.48 |
| Total contract income | 287,262.63 | 339,415.74 | 85,909.76 |
| Less expenses: | |||
| Commissions | 62,275.00 | 75,863.17 | 11,295.00 |
| Collection fees | 1,141.93 | 1,830.38 | 1,898.23 |
| General expenses | 328.27 | 562.44 | 114.56 |
| Salaries | 917.50 | 1,250.00 | 1,500.00 |
| Taxes | 9,010.02 | 5,774.62 | 142.17 |
| Remainder of contract income | 213,589.91 | 254,135.13 | 70,959.80 |
| Less transfer to petitioner for interest on investment (net) | 19,255.27 | 14,575.27 | 9,572.96 |
| Remainder | 194,334.64 | 239,559.27 | 61,386.84 |
| Less division thereof: | |||
| One-half to Stewart and Fry | 97,167.32 | 119,779.93 | No entry |
| One-half to petitioner | 97,167.32 | 119,779.93 | No entry |
| Balance open on ledger | Nil | Nil | 61,386.84 |
*1516 *548 The taxable income from the sales of lots on the installment plan and the allowable deductions have been computed and considered by the respondent as follows in determining the deficiencies:
| Item | 1923 | 1924 | 1925 |
| Principal collected | $71,901.10 | $133,393.31 | $137,967.61 |
| Mortgages taken in payment of land | 6,140.00 | 4,385.81 | |
| Total collections | 71,901.10 | 139,533.31 | 142,353.42 |
| Realized profit thereon | 52,631.61 | 102,138.38 | 104,202.70 |
| Realized profit attributable to March | |||
| 1, 1913, value | 2,631.58 | 5,106.92 | 5,210.14 |
| Taxable income from collections | 50,000.03 | 97,031.46 | 98,992.56 |
| Deductions allowed: | |||
| Commissions | 46,144.35 | 66,795.48 | 41,088.05 |
| Allowance on profits advanced | 2,000.00 | ||
| Profit on special lots - | |||
| Principal | 5,671.69 | 4,868.64 | |
| Interest | 3,876.01 | 20,138.65 | |
| Abstracts and miscellaneous expenses | 826.14 | 338.30 | |
| Deduction on account of surplus in | |||
| interest account | 13,315.72 | ||
| Deductions allowed | 48,144.35 | 77,169.32 | 79,749.36 |
| Income from interest on contracts | 14,457.31 | 37,230.63 | 49,345.86 |
The profits realized upon collections were computed by the respondent upon the following basis:
| Total selling price | $1,189,000.00 | |
| Cost of land, 72 acres | $15,374.57 | |
| Improvements | 303,140.01 | |
| 318,514.58 | ||
| Gross profit on cost, 73.2% of sales | 870,485.42 | |
| March 1, 1913, value of land | 75,000.00 | |
| Cost of land | 15,374.58 | |
| 59,625.42 | ||
| Gross profit on March 1, 1913, value | 810,860.00 |
*1517 In connection with the sale of building lots, the petitioner, in certain cases, permitted the lots to be deeded to the purchasers prior to full payment of the contract obligation, substituting for the land contracts second mortgages upon the lots securing the payment of the indebtedness. With respect to such transactions the respondent included the following amounts in installments collected as representing the principal amounts of mortgages so accepted: in 1924, $6,140; in 1925, $4,385.81. The mortgages accepted, according to the books, were in the following amounts of principal and covered the following indebtedness: Entered July 1, 1924, an amount of $2,640 covering the remainder of the purchase price of lot 11; entered September 3, 1926, an amount of $1,000, covering the remainder of the purchase price of lot 308; entered December 31, 1925, with explanation that the transaction occurred in January, 1925, an amount of $3,500 which covered the remainder of the purchase prices of lots 305 and 306, $2,213.65; interest, $738.99; cost of improvements assumed by purchasers, *549 $270.36; and an amount of $277 for commission and fee payable to Stewart and Fry.
According to*1518 the books the receipts from the sale of burial rights from 1918 to 1926 were as follows:
| 1918 | $20,000.00 |
| 1919 | 20,171.81 |
| 1920 | 35,951.24 |
| 1921 | 60,673.75 |
| 1922 | 40,725.50 |
| 1923 | $41,167.05 |
| 1924 | 61,894.67 |
| 1925 | 55,442.45 |
| 1926 | 49,738.54 |
In the petitioner's ledger of 1925 there appears an asset account headed "Bonds, Perpetual Care, A," in an amount of $16,142.40. This item was not explained by the testimony.
In June, 1929, the petitioner entered into an agreement in writing with the Detroit and Security Trust Company providing, so far as pertinent here, as follows:
I.FIRST PARTY is the owner of certain burial grounds in the City of Detroit, Michigan, known as EVERGREEN CEMETERY and the mausoleum situated thereon, and it desires to provide, in conformity with the requirements of the statutes under which the said FIRST PARTY is organized, for the perpetual maintenance of lots, mausoleum, buildings, roads and grounds of said EVERGREEN CEMETERY. To that end FIRST PARTY hereby establishes, subject to the control of the TRUSTEE, a fund separate and apart from all other funds, property or securities belonging to said FIRST PARTY to be forever conserved for*1519 the perpetual care and maintenance of said EVERGREEN CEMETERY, its mausoleum, buildings and appurtenances.
(a)
In addition to the money and securities more particularly described in the SCHEDULE OF PROPERTY hereto attached, which the FIRST PARTY has this day set over, assigned, transferred and delivered to the TRUSTEE and which it represents to be all the moneys or securities it is legally bound to keep in its fund for permanent care and maintenance at this date, the TRUSTEE shall receive from the FIRST PARTY from time to time such additional moneys or securities as the FIRST PARTY shall desire to add to its fund for perpetual care and maintenance, as well as all moneys which the FIRST PARTY may be compelled by law to add to the said fund, and all money and securities which the TRUSTEE shall receive from FIRST PARTY shall be held under the terms of this instrument as though assigned, transferred and set over or delivered to it upon the execution hereof. No new agreement shall be necessary but, on the contrary, it shall be sufficient that the money or securities be actually delivered to the TRUSTEE with an informal memorandum of intent on the part of the FIRST PARTY that the same*1520 shall be added to the fund established hereunder.
(b)
The fund hereby established shall be known as the "PERPETUAL CARE AND MAINTENANCE FUND OF EVERGREEN CEMETERY."
*550 II.
The TRUSTEE, unless otherwise directed as hereinafter provided, shall retain, without conversion into cash for reinvestment, all bonds or other securities which it shall receive from the FIRST PARTY * * * but all money which shall come into the hands of the TRUSTEE hereunder, whether the same be received directly from FIRST PARTY or otherwise, shall be invested and from time to time reinvested without the prior consent or subsequent approval of any court, in bonds, mortgages, secured notes and other proper trust investments. * * *
III.The FIRST PARTY hereby confers upon the TRUSTEE full power and authority, without need for the prior consent or subsequent approval of any court, or of the FIRST PARTY, other than herein, to manage and control this "PERPETUAL CARE AND MAINTENANCE FUND OF EVERGREEN CEMETERY" as to it shall seem best; to control the investment and re-investment thereof; to sell any part or all of the trust principal, whether the same be stocks, bonds or other securities or evidences, *1521 at public or private sale, for such prices, on such terms and subject to such conditions as the TRUSTEE shall deem advisable and for the best interests of said fund; to execute and deliver each and every instrument necessary or proper to consummate any transaction herein authorized, and to do and perform each and every other act or thing requisite in its judgment to put into effect any of the powers contained in this instrument.
* * *
VI.The entire net income arising from this PERPETUAL CARE AND MAINTENANCE FUND OF EVERGREEN CEMETERY shall, as it accrues, be added to the principal, until there shall be in the hands of the TRUSTEE hereunder the principal sum of FOUR HUNDRED THOUSAND ($400,000.00) DOLLARS, according to the par value of the securities and investments held by it, or until the Board of Directors of FIRST PARTY shall direct to the contrary, it being understood that under the existing law said Board of Directors has the authority to determine when the receipts from the sale of lots and crypts and from other sources shall become insufficient to care for and maintain the cemetery for which this trust fund is intended to provide permanent care and maintenance. The*1522 said TRUSTEE, upon the request of the FIRST PARTY, may in any year advance from the earnings of said fund so much thereof as may be necessary to meet any deficit in the operation of said cemetery occurring from insufficiency of receipts by the cemetery.
(a)
Thereafter such part of the income as the Board of Directors of FIRST PARTY or its successor or any other association which may have been formed by lot and crypt holders with the consent of said FIRST PARTY for the purpose of directing the proper care and maintenance of said cemetery, or any court which may then control said cemetery may determine proper, shall be subject to withdrawal but the same must be used and applied for the proper care and maintenance of said cemetery. No portion of such income shall be distributed to stockholders of FIRST PARTY or applied to any other purpose than the maintenance and care of said cemetery.
* * *
XI.*551 This agreement is entered into in conformity with the statutory requirement under which said FIRST PARTY is incorporated and the same shall be deemed irrevocable, but FIRST PARTY hereby reserves for itself, and its successors, if any, the right and privilege to amend*1523 the terms of this agreement whenever the same shall be found incompatible with the laws of the State of Michigan governing the creating, administration and protection of such perpetual care and maintenance funds as this, and the said FIRST PARTY reserves for itself, and its successor or successors, the right to make such other changes and admendments in this instrument as shall not be inconsistent with any then existing law of the State of Michigan applicable to such perpetual care and maintenance funds as this.
* * *
XIV.In the event of a change of TRUSTEE, the funds herein set aside and the profits accruing thereon shall not lose their identity as a perpetual care fund and shall not in any way be subject to use or disposal other than in the manner and for the purposes herein stated.
Pursuant to this agreement the petitioner transferred and delivered to the Detroit and Security Trust Company certain bonds listed in a schedule attached to the agreement at an aggregate ledger or carrying value of $243,400 and an amount of $575.15 cash.
The value as of March 1, 1913, is 12.295 cents per square foot for cemetery lots and graves sold from sections 16 to 21, inclusive, and*1524 sections known as Ferndale and Lakeview. The total number of square feet sold from these sections during the taxable years is as follows:
| Square feet | |
| 1923 | 34,759 5/6 |
| 1924 | 27,001 1/4 |
| 1925 | 21,744 1/3 |
The petitioner filed returns for the taxable years reporting profits from the cemetery on the accrual basis and from the sales of city lots upon the installment sales basis. The tax liability of the petitioner was investigated in the field in April, 1927, the revenue agent disregarding the returns and reconstructing net income from the books, following the basis of accruals for the cemetery and the installment sales basis for the city lots. The deficiencies here under consideration equal those recommended by the revenue agent.
OPINION.
VAN FOSSAN: The record in this case is in such an unsatisfactory condition that it has made very difficult the ascertainment of the facts. The proper trial of a case before the Board requires thorough preparation, a clear understanding of the issues, and the marshaling *552 of the evidence in such a way as to indicate clearly the effect of the same and the issue to which it appertains. This is not accomplished by*1525 dumping into the hands of the Board a number of books of account and other similar evidence. Such evidence is not self-illuminating. The Board should not be asked to ferret out the correct answer to technical or difficult questions of law and fact from unexplained, uncoordinated evidence. One of the duties of counsel is to assist in ascertaining the true facts. This duty has not been discharged in this case.
The first issue is purely a fact question. It appears from the evidence that the petitioner kept its cemetery accounts on the accrual basis, but in 1923 it entered upon its books as profit for that year an amount of $1,385.28 income from interest which was actually earned and collected in its cemetery business in 1922 and which, therefore, should have been entered and reported in 1922. It follows that the item has been erroneously included in income for 1923 and should be excluded in the recomputation authorized in this opinion.
In the second issue petitioner contends that certain ordinary expenses of collection fees, salaries, taxes and other items have been overlooked and not allowed by respondent. In the third issue petitioner claims that certain deductions allowed*1526 by respondent should be increased. The fourth issue arises from an allegation that income is overstated by respondent. On all of these issues we are met by a failure to prove facts sufficient to overcome respondent's determination. The lack of identity between the figures as shown on the books and those employed in respondent's computation, coupled with the scant testimony on the issue, leaves us entirely uninformed. From the record before us it is impossible to say with certainty what has or has not been included. The testimony of petitioner's witnesses on these points added nothing. Their statements were merely a recital of the items openly appearing on the face of the computation or in the books. There is no direct testimony as to the actual payment of these items. Petitioner has not proven respondent's computation to be in error.
In the fifth issue the petitioner claims that certain income from interest on the installment contracts should be revised to accord with the fact that such receipts were not all income to the petitioner. The contention is that pursuant to the contract the interest so received was divided equally between the petitioner and Stewart and Fry and*1527 therefore only 50 per cent of the same was taxable to the petitioner. The evidence supports this contention and income should be adjusted accordingly. The sixth issue presents a different question. In the case of a few of the sales contracts which called for deferred payments and the withholding of a deed until the purchase price was *553 paid, the petitioner gave a deed and accepted a second mortgage securing minor amounts of remaining unpaid purchase-money obligations. Nothing was realized in cash at the time. The whole procedure was a mere matter of convenience resulting in weakening the petitioner's security and did not alter the essential fact that the deferred payments were to be continued. The income should continue to be reported if and when collected.
In the seventh issue the petitioner claims the right to deductions from income in each of the taxable years of claimed liabilities under section 7 of the Act of 1869, State of Michigan (see section 11166 [sec. 7, ch. 212] Michigan Compiled Laws, 1915), which provides as follows:
(11166) SEC. 7. It shall be the duty of such board of directors to preserve good order in the grounds of such cemetery; to provide*1528 for the laying out and embellishing of the same, and to see that they are well kept and in good condition. When the payments for lands purchased shall have been fully made, to reserve at least two-thirds of all the receipts of such corporation which shall be derived from the sale of burial rights after the payment of the current expenses for interest, improvements, and embellishing, until the aggregate amount thereof shall, in the opinion of said board, be sufficient to constitute a permanent fund which, when invested, shall produce an income large enough to meet the expense of keeping the grounds of such cemeteries perpetually in good condition after the same shall have once been properly laid out, improved, and embellished according to the plan thereof; to invest the receipts to be reserved as aforesaid in the bonds of the United States, or of the state of Michigan, or of municipal corporations of this state, and to use the income thereof only for the purposes aforesaid; to cause to be issued scrip or certificates to each subscriber to the articles of the association, which certificates shall specify the amount paid into the capital stock by such subscriber. Such scrip shall be*1529 personal property and transferable by the holder thereof, under such regulations as the board of directors may adopt; to make a report to the annual meeting of the condition of the association, and its receipts and disbursements for the previous year.
An asset account appears on the books of the petitioner for 1925 in the amount of $16,142.40, called "Perpetual Fund." A witness for the petitioner, however, testified that prior to 1929 the petitioner had never made provision for perpetual care. In 1929 the petitioner, in agreement with a trustee, set up a so-called perpetual fund to provide for the care of the cemetery out of the income from the fund; the petitioner retained an interest and control with privilege of making changes and amendments not inconsistent with any then existing law of Michigan applicable to perpetual care and maintenance funds.
The petitioner argues that equity would require substantial compliance with the statute and we are, therefore, expected in view of the inaction of the board of directors, to determine what amount would have been a reasonable fund and the amounts which should have been added thereto during the taxable years. The petitioner's *554 *1530 theory is that these amounts, which we are asked to determine, are properly allowable deductions from income in the taxable years. It would be profitless to consider the legal effect of transfers to the so-called perpetual fund, for it is apparent from the findings that we are not in a position to make the desired determinations. We are unable to say what fund would be necessary, since we do not know the expense of keeping the grounds in good condition; we do not know what two-thirds of the receipts each year from the sale of burial rights over and above interest, improvement and embellishment, covering the long period of years, beginning in 1905, during which the petitioner has operated, amounted to; we are not satisfied that an exercise of sound discretion on the part of the board of directors would have required certain and definite additions, or additions to the fund in the taxable years. Clearly, the petitioner has failed to substantiate his contention as to this issue.
The question of fact presented by the eighth issue is disposed of by stipulation of the parties. The agreed value as of March 1, 1913, of the cemetery lots and the quantities sold as indicated in the findings*1531 of fact will be considered in the recomputation of income.
The ninth issue is, in effect, a claim by the petitioner for the application of the net loss provisions of the statutes if this redetermination results in statutory net losses. If the recomputations made pursuant to this opinion show net losses the matter will be disposed of under Rule 50.
Decision will be entered under Rule 50.