The opinion
*585 OPINION.
Marquette:
The single question before us relates to the computation of the taxpayer’s average net income for the pre-war period, as defined in sections 310 and 311 of the Revenue Act of 1918.
The taxpayer admits that the action of the Commissioner in disallowing the deduction of the reserves for doubtful accounts during the years 1915 to 1919 was correct, but contends that the same position should be maintained consistently for the years 1913 and 1914 in order properly to determine the pre-war net income.
We agree with the taxpayer in that contention. The deduction of reserves for bad debts was first permitted by the Revenue Act of 1921. The items in question were not even bad debts. They only represented an estimate as to doubtful accounts with no evidence of worthlessness.
The taxpayer’s average net income for the pre-war period should, accordingly, be increased and, with proper adjustment in invested capital, the taxes should be recomputed.
Aeundell not participating.