*684 Before JAMES, SMITH, LITTLETON, and TRUSSELL.
This is an appeal from the determination of a deficiency in income and profits tax for the years 1919, 1920, and 1921, in the amounts, respectively, of $396.71, $188.08, and $28.23, a total of $609.02. Not all of the above deficiencies are in controversy.
FINDINGS OF FACT.
The taxpayer is a New York corporation, engaged in the business of manufacturing and selling pharmaceutical preparations, with its principal place of business in New York City.
During the taxable years in question the taxpayer took depreciation upon its books and claimed a depreciation deduction in its income-tax return in the amount set down in the first column of the table below. In determining the deficiency here in question, the Commissioner made adjustments, as shown by the second and third columns below. The Commissioner computed depreciation upon the average of the assets during the year; the taxpayer, upon the total of the asset value appearing upon the books at the end of the year.
| Depreciation per taxpayer's return. | Depreciation proposed by Commissioner. | Proposal to disallow. | |
| 1919 | $1,399.51 | $1,320.88 | $78.63 |
| 1920 | 1,495.64 | 1,440.92 | 54.7 |
| 1921 | 1,671.41 | 1,572.20 | 99.21 |
*2597 In the New York office the taxpayer computed and claimed depreciation at the rate of 5 per cent upon furniture and fixtures. These consisted to a large extent of partitions, shelving, floor covering, *685 and light fixtures built into the premises occupied by the taxpayer under a lease for 10 years.
At about Christmas during each of the years here in question the taxpayer paid a bonus of $5 to each of its employees. This bonus amounted, for 1919, to $155, and for 1920 and 1921, to $185 for each year. In determining the deficiency here in issue the Commissioner disallowed these deductions claimed by the taxpayer.
In making information returns to the Commissioner in connection with its annual return the taxpayer did not advise the Commissioner as to these payments or include them in the amount reported paid to the employees to whom payment in excess of $1,000 had been made during the year.
DECISION.
The net income of the taxpayer during these several years should be computed by allowing 10 per cent depreciation upon furniture and fixtures of the New York office, upon the basis of the average investment therein during each of the several years, and by the further*2598 allowance of the bonuses paid to employees in the taxable years in question. Final determination will be settled on 10 days' notice, in accordance with Rule 50.