
    Farm Implement Co., Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 9823.
    Promulgated April 26, 1927.
    
      Benjamin H. Flesher, Esq., for the petitioner.
    
      F. O. Graves, Esq., for the respondent.
    This is a proceeding for the redetermination of deficiencies in income and profits taxes in the amounts of $3,052.89 for 1919, and $1,248.91 for 1920.
    
      The deficiencies arise from the action of the Commissioner in computing the net income of the petitioner by the comparison of the net worth of the petitioner at the close of the respective years with the net worth at the beginning thereof, the books being kept upon the single-entry method.
    FINDINGS OP PACT.
    The petitioner is a Minnesota corporation, organized May 1, 1917. It is engaged in the retail farm-implement business and retail automobile sales agency in the City of Albert Lea.
    The petitioner filed its income and profits-tax returns showing thereon a net income of $3,518.78 for 1919, and a net income of $5,365.11 for 1920. The returns were accompanied by balance sheets taken from its books of account. The petitioner kept its books by the single-entry method and from its books the net income could only be determined by making a comparison of the net worth at the close of the year with the net worth at the beginning of the year.
    A revenue agent examined the petitioner’s books and computed the net taxable income upon that basis. The petitioner protested the agent’s adjustments and as a result of information submitted an adjustment of $2,093 was made in the válue of assets as of December 31, 1919, resulting in a decrease of that amount in the income for that year and a corresponding increase in income for 1920.
    The adjustments made by the revenue agent in reducing the values of assets to the extent of $2j093 were sufficient to reduce the values shown by the books to the values at that time.
    The assets appearing on the books at the close of 1920 were overstated $120, which resulted in the income for 1920 being overstated to that extent.
   OPINION.

Trammell :

In our opinion, the determination of income, under the facts in this case, made by a comparison of the net worth at the close of the year with the net worth at the beginning of the year, is the correct and proper method of determining the income of the petitioner. In the Appeal of Index Notion Co., 3 B. T. A. 90, we said:

Where books oí account are maintained by the single-entry method of bookkeeping, the determination of net income is made by comparison of the net worth at the close of the year with the net worth at the beginning of the year.

The testimony of the petitioner was to the effect that certain assets as shown by the boobs as of December 31, 1919, were overstated and that certain assets shown by the books at the end of 1920 were overstated.

Upon tbe evidence we are not convinced tliat tbe net worth as determined by the respondent at the end of 1919 has been incorrectly stated. On the protest of the petitioner the respondent made a reduction in the values of assets and the evidence does not convince us that the assets should be further reduced in value at the end of 1919.

With respect to the balance sheet at the end of 1920, it appears that the respondent has determined the value of a truck at $1,200 when the cost thereof was $1,061, with $37 freight charges, making a total of $1,098. This truck should not be included in the balance sheet at a greater amount than $1,098. This reduces the net worth ■at the end of 1920 by $102, resulting in a reduction of the net income by that amount.

Judgment will he entered on 15 days’ notice, under Rule 50.  