The opinion
*459 OPINION.
Siefkin:
The petitioner argues that the facts in this proceeding bring it squarely under the Board’s decision in Meyer Jewelry Co., 3 B. T. A. 1319, where it was held that the cancellation of indebtedness by agreement of creditors under the circumstances set forth in the case did not constitute income. The respondent, on the other hand, makes three contentions: (1) That the cancellation of indebtedness (or “ allowance,” as the respondent prefers to call it) constitutes a reduction in the cost of goods sold; (2) that it is taxable income in *460 the year received; and (3) that the facts are distinguishable from those in Meyer Jewelry Co., supra.
As to his first contention, the respondent concedes that if the goods as to which the allowance was made were purchased in 1921, the allowance or cancellation of indebtedness would not be income. But, he saj^s, the petitioner has not met his burden of proof to the extent of showing that all the goods were purchased in 1921. The respondent also argues that if any part was purchased in 1920, the basis for the inventory at the end of that year not being shown, it is a necessary part of the petitioner’s case to show that no part of the purchases in question, if any, was in fact included in the cost of goods sold in 1921.
We think this contention is not well taken, being raised for the first time in the brief of the respondent. The record shows that the Commissioner added the amount in question to income because he held that cancellation of indebtedness constituted income under the regulations and the Bureau’s rulings. The petitioner, by his petition, questioned that conclusion, and issue was joined by the respondent on the allegations of the petitioner that the amount canceled did not constitute income.
As to the respondent’s second and third contentions, it is also our opinion that they can not be sustained. As we view this proceeding, the facts are not distinguishable from those in Meyer Jewelry Co., supra, and our conclusion must be the same as in that case. The respondent erred in adding $50,087.51 to income in 1921.
Reviewed by the Board.
Judgment will be entered under Rule 50.
Trammell dissents.