Court Opinion

ID: 4634616
Source: CourtListenerOpinion
Date Created: 2020-11-21 03:16:25.425307+00
Date Added: 2024-06-11T07:58:14.878258
License: Public Domain

WAUSAU CANNING CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Wausau Canning Co. v. CommissionerDocket No. 13966.United States Board of Tax Appeals14 B.T.A. 765; 1928 BTA LEXIS 2919; December 17, 1928, Promulgated *2919  Petitioner intending to take its inventory on the basis of cost or market, whichever was lower, erroneously inventoried a part of its goods at cost.  The market value at the time of inventory is found to be less than the cost and the petitioner is entitled to have its tax liability computed upon the basis of the inventory at market value.  Romaine Clark, Esq., for the petitioner.  R. H. Ritterbush, Esq., for the respondent.  SIEFKIN*765  This is a proceeding for the redetermination of a deficiency in income and profits taxes for the year 1920 asserted by the Commissioner in the amount of $1,457.05.  The petitioner alleges that an additional amount of $1,607.26 paid by it, as to which a claim for refund and credit was denied, and the letter which asserted the deficiency is also in controversy.  The sole question involved is the amount of the petitioner's inventory on December 31, 1920.  FINDINGS OF FACT.  The petitioner is a Wisconsin corporation with its principal office at Wausau.  During the year 1920 it was engaged in the canning business.  Frank T. Stare, the manager of petitioner during the year 1920, supervised the taking of the inventory*2920  for the company in December, 1920.  He subscribed and swore to a certificate of inventory for the calendar year 1920 on March 3, 1921, such part of the certificate as is material being as follows: "I swear (or affirm) that the closing inventory of the taxpayer named above, amounting to $117,889.79 was taken under my direction, and that to the best *766  of my knowledge and belief is true and complete in every respect; that the method of pricing the raw material, work in process, and finished goods was at cost The words "or market whichever lower" had a line drawn through them which did not obliterate the words.  The amount of $117,889.79 was carried forward into the petitioner's income and profits-tax return for the year 1920 filed on March 29, 1921, and was also used in its amended return for the same year filed November 15, 1921.  That amount, with a small adjustment making the amount $117,480.99, covered canned peas only.  The fair market value of such peas on December 31, 1920 was $98,638.88.  Other items included in the inventory of the petitioner at the end of 1920 were included at cost or market whichever was lower.  The intention of Fred J. Strong, president of*2921  the taxpayer, was that inventories for 1920 should be taken at cost or market whichever was lower.  The inventory of canned peas was, in fact, taken at cost.  In years subsequent to 1920, the petitioner inventoried its goods at cost or market, whichever was lower, and returns reflecting such inventories were accepted by the Bureau of Internal Revenue.  Except for Fred J. Stare, the manager of the petitioner during the years 1920 and 1921, no responsible officer of the petitioner or its board of directors was aware that the inventory of canned peas at the end of 1920 was taken at cost rather than cost or market, whichever was lower, and reflected in the petitioner's tax returns for that year.  Such knowledge did not come to the petitioner until a year or two after the inventory was taken.  The respondent, in determining the deficiency here involved, used as the inventory of canned peas at the end of the year 1920 the sum of $117,480.99 instead of the market value at that time which was $98,638.88.  OPINION.  SIEFKIN: We are satisfied that, regardless of the statements of the certificates of inventory attached to the 1920 return, the inventory of canned peas as of that date was*2922  taken at cost rather than cost or market, whichever was lower.  We are also satisfied that such action was taken by the general manager of the petitioner without authority from the officers or directors of the petitioner.  We have found the value of such goods as of December 31, 1920, to be $98,638.88, which is supported by ample evidence of qualified witnesses.  Under article 1582 of Regulations 45, as amended by Treasury Decision 3108, the petitioner could adopt, regardless of its past practice, the basis of "cost or market whichever is lower" for its inventory as at December 31, 1920.  We are satisfied that it intended to do so, and that its tax liability should be computed upon such basis.  Judgment will be entered under Rule 50.