*513 Before JAMES, STERNHAGEN, TRAMMELL, and TRUSSELL.
This is an appeal from the determination of a deficiency of $877.48 in income and profits taxes for the year 1918. The taxpayer alleges errors by the Commissioner (1) in the valuation of the taxpayer's coal mine as of March 1, 1913, for the purpose of ascertaining the amount of depletion to be allowed as a deduction from gross income; (2) in determining invested capital; (3) in refusing to compute the tax under the provisions of sections 327 and 328 of the Revenue Act of 1918. The issue raised by the second alleged error was abandoned by the taxpayer in his brief. No evidence was offered to sustain its allegations as to the third alleged error.
Upon the first issue mentioned the Commissioner offered testimony tending to show a value on March 1, 1913, based on sales of similar lands, but the testimony was not specific or definite enough to enable the Board to fix a value on this theory.
Taxpayer claimed as further additions to its operating profit certain items of interest alleged to have been paid*2369 in the years 1905 to 1912, inclusive, and not charged against income. These items were contained in a summary statement prepared by an accountant. No testimony was offered explaining the character of the items or the manner in which they were handled in the taxpayer's accounts. The Board considers this evidence insufficient.
FINDINGS OF FACT.
1. The taxpayer is a Pennsylvania corporation organized February 18, 1904. It has an authorized and paid-up capital stock of $50,000. It acquired bituminous-coal-bearing lands in Indiana County, Pa., and has been engaged solely in developing and operating the mines thereon.
2. In arriving at the valuation on which the deficiency was determined the Commissioner used an analytic appraisal method. This method is based on the discounting of prospective earnings to present value, and in making the computations, the so-called Hoskold's formula was used. The following tabulation shows the figures used and the result obtained by the Commissioner:
| (1) Tons recoverable Mar. 1, 1913 | 2,214,363 | |
| (2) Total operating profit in years 1905 to 1912, inclusive | $281,424.89 | |
| (3) Per ton operating profit, years 1905 to 1912, inclusive | $0.199 | |
| (4) Total expected earnings | 440,658.24 | |
| (5) Total expected earnings discounted at 8 per cent with a sinking fund invested at 4 per cent, over 18 years | 205,734.52 | |
| Less: | ||
| (6) Value of plant and equipment | $94,290.90 | |
| (7) Estimated plant renewal | 15,000.00 | |
| 109,290.90 | ||
| (8) Value of coal Mar. 1, 1913 | 96,443.62 | |
| (9) Value per ton Mar. 1, 1913 | 0.0436 |
*2370 *514 3. A revenue inspector made a report, dated June 28, 1918, after an examination of the taxpayer's books, as a result of which additional income taxes were assessed and paid for the years 1909 to 1916, inclusive. The report shows operating profit in the years from 1909 to 1912, inclusive, as folows:
| 1909 | $32,914.88 |
| 1910 | 43,685.35 |
| 1911 | 15,954.42 |
| 1912 | 70,665.06 |
| Total | 163,219.71 |
This total is $32,049.55 greater than the sum of the figures used by the Commissioner for these years. We find the total operating profit (item 2 in the first tabulation above) should be increased by $32,049.55.
4. The estimated recoverable tonnage in the mine when acquired by the taxpayer was 3,632,528. The amount extracted prior to 1913, was -
| Tons | |
| 1905 | 130,604 |
| 1906 | 126,735 |
| 1907 | 194,421 |
| 1908 | 170,994 |
| 1909 | 177,075 |
| 1910 | 218,766 |
| 1911 | 165,389 |
| 1912 | 228,311 |
| Total | 1,412,295 |
| Average | 176,537 |
On March 1, 1913, the estimated quantity remaining was 2,220,333 tons. We find the remaining life of the mine is 12.6 years.
DECISION.
The deficiency should be computed in accordance with the foregoing findings of fact. Final determination*2371 will be settled on consent or on 10 days' notice, in accordance with Rule 50.
ARUNDELL not participating.