*703 This proceeding results from the determination of deficiencies in income and profits taxes amounting as follows: for the year 1919, $38.01; for the year 1920, $16.86.
Petitioner alleges error with reference to the following issues: (1) The income for 1919 is overstated by an amount of $648.30, due to a failure to take into consideration the correct merchandise inventories at the beginning and the end of the taxable year; (2) the income for 1920 is overstated by an amount of $1,592.20, due to a failure to consider the correct inventory at the beginning of the taxable year; and (3) for the years 1919 and 1920 there has been a failure to allow as a deduction from income a reasonable allowance for depreciation of fixed assets.
FINDINGS OF FACT.
The petitioner is a corporation with its principal office at Gaylord, Minn.
During the years 1919 and 1920, the petitioner owned assets as follows, and the cost thereof to petitioner, less depreciation charged off on the books, amounted as follows:
| Assets | 1919 | 1920 |
| Store building | $11,000.00 | $11,000.00 |
| Addition in 1919 | 213.78 | 213.78 |
| Fixtures | 3,000.00 | 3,000.00 |
| Additions in 1919 | 317.45 | 317.45 |
| Additions in 1920 | 161.10 | |
| Heating plant | 865.00 | 865.00 |
| Frame building | 3,000.00 | 3,000.00 |
*3204 Allowances for the exhaustion, wear and tear of the above assets have been allowed as deductions from income as follows: for 1919, $721.42; for 1920, $736.94.
The construction of the store building was completed in April, 1908, at a cost slightly in excess of $14,000. This store is of brick construction, which has deteriorated and the brick work will have to be renewed. At the front of the building the metal flashing around a coping has rusted away and requires renewal to prevent leaks.
Fixtures were originally installed in the building in 1907 and 1908 at a cost of at least $2,900. A heating plant was installed in the summer of 1908 at a cost of approximately $1,000.
The frame building was located upon a farm in Stutsman County, N. Dak., when the farm was acquired in 1911.
The additions to store building in 1919 consisted of shelving and an overhead balcony in the warehouse for storage purposes.
*704 The additions to fixtures in 1919 consisted of fixtures for the ready-to-wear department, racks and mirrors.
At the beginning of 1919, the inventory of the petitioner was taken on the basis of the lower of cost or market. As soon as possible after January*3205 1 the physical count and inspection was started and the inventory was completed as rapidly as possible throughout the month of January. As the month of January passed the taking of the inventory was hastened in order to complete the inventory by January 31. Revisions were made by way of deductions for goods sold after inventorying and the completed inventory listed the goods on hand on January 31. The inventory at the beginning of the year 1920 was taken and valued upon the same method and basis.
The inventory of January 31, 1919, was valued at an aggregate of $38,406.26, from which amount was deducted an allowance amounting to $2,240.50, designed to cover contingencies or depreciation of stock, leaving a net inventory value of $36,165.76.
The inventory of January 31, 1920, was valued at an aggregate of $45,491.64, from which amount was deducted an allowance for contingencies or depreciation amounting to $1,592.20, leaving a net inventory value of $43,899.40, to which was added for merchandise entered in various books and for sundry charges and claims an amount of $1,116.20, the final amount of the inventory value being $45,015.64.
In the return for the calendar year 1919, *3206 the petitioner computed the cost of goods sold in consideration of an inventory at the beginning of the year amounting to $39,204.69, and at the end of the year amounting to $49,306.94. In the return for the calendar year 1920, the petitioner computed the cost of goods sold, in consideration of an inventory at the beginning of the year amounting to $49,306.94. The respondent has accepted these values without adjustment.
OPINION.
LANSDON: This is a case wherein the issues are purely questions of fact, yet we are confronted by a failure of the record to afford any definite basis upon which to determine that the respondent has erred.
In the first and second issues the petitioner seeks to revise the amounts of the inventories at the beginning and the end of the year 1919 which it reported in its returns and which values have been accepted by the respondent. It is in evidence that the inventories actually taken were of the goods on hand on January 31 of each year, although the returns were filed on a calendar year basis. Furthermore, it appears that the values of the inventories reported in the returns differ from the actual inventories according to the *705 books. No*3207 attempt has been made to reconcile these differences. From the facts before us we can not state to what extent, if any, the cost of goods sold has been erroneously reported, in either of the taxable years.
The remaining issue relates to the amount of the deductions allowable for exhaustion, wear and tear. Certain book values are used by both parties in their computations, but they differ as to the annual percentage rates to be allowed in the computations. There is no satisfactory evidence that the book values were the acceptable remaining cost after deducting depreciation actually sustained or that the remaining lives of the assets may be expected to differ materially from the estimates of the respondent.
Judgment will be entered for the respondent.