
    OSCAR FRIEND, Executor, Estate of HERMAN A. MEYER, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
    Docket No. 1062.
    Decided August 2, 1926.
    
      Osear Friend for the petitioner.
    
      W. H. Lawder, Esq., for the respondent.
    Before SteRnhagen, Littleton, and Trtjssell.
   Littleton:

This proceeding was instituted on December 13, 1924, for the purpose of contesting the correctness of the Commissioner’s determination of a deficiency in income tax in the amount of $337.67, for the calendar year 1919, resulting entirely from the denial by the Commissioner of a loss on a sale of a stock of merchandise. Herman A. Meyer died on December 4,1925, and this proceeding was revived in the name of his estate.

FINDINGS OF FACT.

During the year 1919, and for several years prior thereto, Herman A. Meyer was engaged in the retail clothing business at Dubuque, la. He kept an inventory of merchandise on hand at the beginning and end of each year, also a record of merchandise purchased and sales made during the year. The return for the year 1919 purported to be upon the basis of cash received and disbursed. It was in fact, however, made upon the accrual basis, and it was necessary for the taxpayer’s return to be made upon the accrual basis in order correctly to reflect his income.

On December 31, 1919, Meyer sold his entire stock of merchandise on hand at approximately 85 per cent of cost, resulting in a loss of $2,835.48. Instead of adding the amount of $19,936.26, received for the stock of merchandise, to the sum of $62,347.17, gross sales to customers during the year, giving a total of $82,283.43, and deducting therefrom the cost of goods sold, together with expenses amounting to $74,111.58, which would have shown the net income from the business of $8,171.85, he included in Schedule A of his return the cost of goods sold, less inventory on December 81, the date of the sale of the entire stock taken at cost, and deducted, among other items of expense, the amount of $2,835.48, representing the difference between the cost of merchandise and the amount received therefor as “ depreciation of stock,” and reported á net income from his business of $8,171.85. The Commissioner increased the income reported in the amount of $2,835.48 and determined the deficiency here in controversy.

There is no deficiency for the year 1919. Order will he entered accordingly.  