*1329 Before MARQUETTE and MORRIS.
This appeal is from the determination of deficiencies in income and profits taxes for the calendar years 1918, 1919, and 1920, in an aggregate amount of less than $10,000. Two questions are presented by the petition: Whether the Commissioner erred (1) in reducing accounts receivable as of January 1, 1918, in the amount of $5,005.87, thus reducing the invested capital; and (2) in fixing the inventory value as of December 31, 1920?
FINDINGS OF FACT.
The taxpayer is a North Carolina corporation with principal office at Whitakers, and was engaged in the business of operating a general mercantile store.
In auditing the taxpayer's return for 1918 the Commissioner deducted $5,005.87 from accounts receivable as of January 1, 1918, thus decreasing the invested capital as of that date and increasing the net *1330 income for 1918. By reason of the agreement of the parties, the Board finds that the invested capital for 1918 should be increased in the amount of $5,005.87, as claimed by the taxpayer in its return, and that the*2095 net income for 1918, as determined by the Commissioner, should be reduced in the amount of $255.63. The net income for 1919 as previously determined by the Commissioner should now be increased in the sum of $683.85.
In its original return for 1920 the taxpayer reported inventories on the basis of cost. Some time subsequent to March 15, 1921, the taxpayer filed an amended return in which it attempted to show the closing inventory of 1920 on the basis of cost or market, whichever was lower. The January 1, 1920, inventory was not changed.
The difference in December 31, 1920, inventories, as originally reported and as now claimed, was -
| Cost basis, | Cost or market basis. | Difference. | |
| Groceries and hardware department | $14,016.03 | $11,781.68 | $2,234.35 |
| Dry goods, notions, shoes, etc | 42,186.04 | 28,986.94 | 13,199.10 |
| Total | 56,202.07 | 40,768.62 | 15,433.45 |
The figures making up the cost or market basis were collected by the taxpayer mostly from February, 1921, to the fall of 1921, but partly during 1923, in an effort to ascertain the replacement cost of goods in the inventory as of December 31, 1920. The figures used were largely opinions obtained from*2096 wholesalers as to then market conditions. The Commissioner disallowed the use of the estimated replacement cost figures in determining the December 31, 1920, inventory.
DECISION.
The deficiencies should be computed in accordance with the foregoing findings of fact on the basis of the agreement of the parties with reference to the $5,005.87 item of 1918. The determination by the Commissioner of the December 31, 1920, inventory is approved. Final determination will be settled on 7 days' notice, under Rule 50. ; ; ; .