*3005 Evidence held insufficient to determine that respondent erred in any of the particulars alleged.
*987 This proceeding is for the redetermination of deficiencies in income taxes asserted for the years 1922, 1923, and 1924, only a part of the deficiency for each year being in controversy. The amount of the deficiency, the amount conceded by the petitioner, and the amount in controversy are as follows:
| Year | Deficiency asserted | Acquiesced in by tax-payer | Tax in controversy |
| 1922 | $197.60 | $12.05 | $185.55 |
| 1923 | 217.10 | 95.00 | 122.10 |
| 1924 | 404.06 | 143.78 | 260.28 |
| Totals | 818.76 | 250.83 | 567.93 |
The petitioner alleges that the respondent erred in the following particulars:
1. In that he has added to taxable income for each of the years 1922, 1923, and 1924 amounts of $427.37, $583.30, and $870.06, respectively, alleged to have been deducted for Federal income taxes;
2. In that he disallowed deductions for depreciation in the amounts of $981.02 for 1922, $323.49 for 1923, and $1,216.21 for 1924; and
3. That petitioner is*3006 entitled to deductions of $76 for 1922 and $70 for 1923, paid for capital-stock taxes.
FINDINGS OF FACT.
The petitioner was incorporated under the laws of the State of Kansas, and during the taxable years in question, and for a number of years prior thereto, was engaged in dredging sand from the river channel.
In 1916 petitioner's boat and equipment used in the dredging operations sunk in the river, and as some of the stockholders were unwilling to go ahead with the business, the two principal stockholders formed a partnership known as Kaw River Sand Co., which built another boat, raised the one that had sunk, salvaged the equipment and put the corporation back on its feet. Thereafter, the partnership *988 and the corporation had a working arrangement whereby the partnership purchased sand from the corporation at the river bank at a fixed price. The partnership handled all the funds, paid all the bills and credited the corporation with the sand taken out, annual settlements being made in connection with each year's work.
Included in the bills paid by the partnership for the corporation were income and capital-stock taxes which were charged on the books of the partnership*3007 into a general account. It was the practice of the bookkeeper at the close of each year to set up the figures for the income-tax returns on separate sheets, and the amount of the tax thereon shown constituted credits to the partnership in its annual settlements with the corporation. No entry was made with respect to these taxes on the corporation's books.
Petitioner's depreciable assets included an engine, acquired in 1917 to replace the original engine purchased in 1914, the original frame warehouse, and the original office, constructed in 1914 or 1915, another warehouse and office acquired subsequent to 1915, a boat which was built in 1916 and the one that had been salvaged, and certain equipment.
In 1919, upon the advice of its accountants, petitioner changed the rates of depreciation applicable to its depreciable assets. At the hearing petitioner conceded the correctness of respondent's statements, made in his deficiency letter, as to the cost of the depreciable property, and the rates of depreciation applicable for the years in controversy, but contended that these rates should not apply to the years prior to 1919. The deficiency letter contains the following schedule*3008 with respect to depreciation:
| Cost | Rate to 1921 | 1922 | 1923 | 1924 | ||
| Switch | $8,800.00 | 10% | $7,040.00 | $880.00 | $880.00 | Exhausted. |
| Boats | 2,014.10 | 15% | 2,416.88 | Exhausted. | Exhausted. | Exhausted. |
| Machinery | 4,156.95 | 15% | 4,486.62 | Exhausted. | Exhausted. | Exhausted. |
| Buildings | 1,222.75 | 10% | 978.21 | 122.27 | 122.27 | Exhausted. |
| Furniture | 414.43 | 10% | 331.55 | 41.44 | 41.44 | Exhausted. |
| Tools | 455.65 | 50% | 455.66 | Exhausted. | Exhausted. | Exhausted. |
| Totals | 1,043.71 | 1,043.71 | None. | |||
| Depreciation deducted | 2,197.19 | 2,197.19 | $2,197.19 | |||
| Excessive depreciation | $1,153.48 | $1,153.48 | $2,197.19 |
In 1925 the plant was abandoned because the supply of sand seemed to be exhausted, and the prior year's operations had been unprofitable. At the time of abandonment the condition of the sanddredging machinery was such that it could have been operated.
The respondent, after analyzing peitioner's surplus account, determined that income taxes had been taken as a deduction for each of the years 1922, 1923, and 1924, and that the deductions taken for *989 depreciation were excessive. He increased taxable income in each of the years*3009 by the amount of the taxes deducted and allowed depreciation deductions as shown in the schedule set forth above.
OPINION.
MORRIS: The petitioner in this proceeding is faced with the necessity of overcoming the prima facie correctness of the respondent's determination, and this can only be done by the production of proof which will show that the respondent has committed error. The books, which might have shown the manner in which the taxes were handled, were not produced, nor do we have the benefit of the corporate returns which might have shed some light on how petitioner treated the taxes on its returns. The respondent's determination with respect to the first error alleged must, therefore, be sustained for a lack of evidence.
The second issue relates to the deduction to which petitioner is entitled for the purposes of depreciation. The record is silent as to the rates used by the petitioner for years prior to 1919, the useful life of the assets, the dates of their acquisition and their salvage value when the plant was abandoned in 1925. Petitioner's counsel in his opening statement made reference to certain flat rates of depreciation applied to the assets for the years*3010 prior to 1919, but such statements do not constitute evidence of record and can not be considered as facts. As it is impossible to determine from the facts before us that respondent has committed error in reducing the depreciation deduction for each of the years 1922, 1923, and 1924, his action with respect thereto is approved.
The third issue relates to a deduction which is apparently claimed for the first time by the petition as the deficiency letter fails to show that respondent has denied the petitioner any amount as deduction for capital-stock taxes. In its propositions of law the petitioner claims these taxes as deductions by way of ordinary and necessary expenses, but the record is silent as to the amount of taxes paid, if any, and whether the partnership, which appears to have paid all the bills of the corporation, received credit for such payments in making its annual settlements with the corporation. In this state of the record we sustain the respondent's determination.
Judgment will be entered for the respondent.