Jackson Casket & Manufacturing Co. v. Commissioner

*1192OPINION.

Whatever may be said as to the consistency with which petitioner has followed the method of accounting employed in its business, which, includes the practice of setting aside each month a reserve to cover anticipated cash discounts and freight *1193allowances to customers, the fact is that taxable net income is not clearly reflected by that method and, for the year on appeal, it must give way to one which will clearly reflect the income. A reserve of the character which the petitioner seeks to deduct from income is a contingent liability, at least to the extent that it includes anticipated cash discounts, and its deduction in arriving at net income is not authorized by the statute. Appeal of William J. Ostheimer, 1 B. T. A. 18; Appeal of Consolidated Asphalt Co., 1 B. T. A. 79; Appeal of Uvalde Co., 1 B. T. A. 932; Appeal of Morrison-Ricker Manufacturing Co., 2 B. T. A. 1008; Appeal of Thatcher Medicine Co., 3 B. T. A. 154. There is no evidence before us showing the amount of freight allowances made in subsequent years on shipments of 1918, or of the extent of the petitioner’s liability for freight allowances at the close of 1918. The petitioner has not shown that the obligations which it paid or incurred in 1918, by reason of eash discounts and freight allowances to customers, were greater than the deduction which the respondent has allowed.

The petitioner has presented no evidence which indicates any abnormality in income or capital for 1918. Its taxes for that year were high, but high taxes, without any showing of abnormality, are not sufficient reason for special assessment. Its sales for 1918 were greater- than those of any preceding year because of the epidemic emergency, but there is no proof that this effected any abnormality in net income. High taxes and unusually large sales are the two grounds upon which petitioner seeks relief under the provisions of section 328 of the Revenue Act of 1918, but there is no proof of any abnormality which might entitle it to the relief which it seeks.

Reviewed by the Board.

Judgment will be entered for the respondent.