Appeal of Kleeman Dry Goods Co. , 2 B.T.A. 369 ( 1925 )

OPINION.

Ivins:

The taxpayer’s inventory method produces a result' which is neither cost nor cost or market, but simply an estimate of the sale value of the entire stock of merchandise on hand. It was testified that in inspecting the merchandise the officials would find articles which in their opinion had deteriorated fully 50 per cent in value, and perhaps in the same department other items which had maintained full value. Yet items of the two classes mentioned, and all other merchandise in that department, were regarded as one lot, and a general average, running from 2 per cent to 15 per cent, was stricken off cost.

We are not persuaded that the depreciated value (based on cost) of the taxpayer’s inventory as determined by the method above discussed represented market, as the taxpayer contends, and therefore the Commissioner’s determination on that point is approved.

The three accruals detailed in the findings represent liabilities actually incurred during the taxable period, and the taxpayers misnomer of them as reserves can not affect their true character. These items were incurred, and properly accrued at January 31, 1920, and the taxpayer may deduct them from income for the taxable period ending on that date.