OPINION.
Milliken:
The main drive belt consisted of three plys. The under ply became damaged by reason of a tear and the petitioner paid the sum of $1,050.20 to cause the belt to be repaired. This expenditure merely kept the belt in an ordinarily efficient operating condition and did not increase the normal useful life of the belt, or add to its ordinary value. The respondent was in error in refusing to allow the deduction claimed.
It is clear, from the evidence of record, that the sum of $550 paid by petitioner to the Salvation Army for a hospital operated by it, on the condition that the employees of petitioner would be given hospital service at reduced rates, constitutes an ordinary and necessary expense, deductible for the fiscal year 1920.
The third issue presents the principal item in this proceeding and involves the inventory of petitioner of finished goods as of August 31, 1920. There can be no question that the market at the end of the fiscal year, for the goods in question, was most abnormal. Sales were infrequent; contracts of purchase were being freely canceled. It is admitted by counsel for the respective parties, that the market for finished goods obtaining on August 31, 1920, should not be arbitrarily taken. Counsel for petitioner insists that a reasonable period should be taken following the close of the fiscal year, in order .that market might be correctly determined. However, the reasonable period insisted upon would cause a determination to be based upon market prices obtaining in the year 1921, and even subsequent to the close of the fiscal year August 31, 1921. The sale by petitioner of one-half of its finished goods, within 60 days before and following the close of its fiscal year, represents to us a reasonable period for determining the market for the finished goods, and it follows that petitioner's inventory of finished goods should be valued at the market thus established, of 55 cents per pound.
Reviewed by the Board.
Judgment will be entered on 15 days' notice, under Rule 50.