OPINION.
Phillips :
In computing the net income of the petitioner no allowance was made for depletion. It is now agreed between the parties that $1.575 per barrel is a reasonable depletion unit to be used in the computation of the deduction.
The parties also raise the question whether depletion allowance should be based upon the amount of oil produced, whether' or not sold in the taxable year and included in the income of that year, or upon the amount of the oil sold. Petitioner keeps its books upon a cash receipts and disbursements basis. Its share of the oil produced during the year was 26,843.56 barrels. It returned as income the proceeds from the sale of only 23,729.97 barrels. It is not 1mown what happened to the remaining oil, but the parties are agreed that payment therefor was not received by the petitioner in 1919 so as to constitute a part of its income upon a cash receipts and disbursements basis.
In the Appeal of R. M. Waggoner, 5 B. T. A. 1191, it was held that, in such circumstances as we have here, allowance for depletion could be taken only upon the basis of the oil sold during the year, the proceeds of which were included as income; in other words, the depletion was to be taken upon the same basis as the income was returned. The decision in that appeal is decisive of the question here involved. The deficiency should therefore be computed by allowing a deduction for depletion based upon 23,129.97 barrels at $1.575 per barrel.
Decision will be entered on 15 days' notice, under Rule 50.