Opinion ID: 1549711
Heading Depth: 1
Heading Rank: 3

Heading: The Supposed Error in Computation.

Text: Having held that the amounts credited to the Relining Reserve were not properly deductible from the income, the question arises whether for the year 1920 the proper addition to income was $212,000 as the Commissioner found, or $152,000 as the taxpayer asserts. The doubt arises because of the taxpayer's books, which the Commissioner put in evidence. These showed on May 1, 1919, a balance in the reserve of $60,000, to which $152,000 was added by crediting the account with fifty cents a ton. Both figures are, strictly speaking, irrelevant; the important question is, what was the deduction which the taxpayer actually took. If it took the whole credit at the end of the year  $212,000  obviously that amount must be added to the income; if it took only the new credits of the year, these alone should be added. As we have not the return before us for that year, it is impossible to say which is the right figure. There are feeble indications, scarcely amounting to proof, that the examiner understood the deduction on the return to have been the whole balance at the end of the year. On the other hand it is extremely unlikely that so transparently improper a figure should really have been used. The taxpayer has indeed the burden of proof and it must be owned that its evidence is far from cogent. However, the issue cannot lead far afield, or be troublesome to decide, and there would be a great injustice in charging its income with $60,000, if it never took such a deduction. As we said in Taylor v. Helvering, Com'r, 70 F.(2d) 619, 621, the statute itself provides for a rehearing when justice may require one (section 1003 of the Revenue Act of 1926 [26 USCA § 1226]); and this we think enables us to moderate the severity of a rigid application of the burden of proof. The Board should ascertain what was the actual deduction taken, and the order is reversed and the cause remanded for that purpose.