Appeal of TAYLOR-PARKER CO., Docket No. 1343. INC.

Submitted April 6, 1925; decided M a y 20, 1925.
Frederick B. Hill, C. P. A., for the taxpayer. Ward Loveless, Esq., for the Commissioner.

Before Ivins, Marquette, and Morris.
This appeal is from a deficiency asserted by the Commissioner against the taxpayer for the fiscal
years ended February 28, 1919, and February 29, 1920, and the ten-month period ended December 31
, 1921, in the sum of $3,004.30, of which sum $2,300 is in contro versy. The deficiency arose
from (1) the refusal of the Commis sioner to permit the taxpayer to take as a deduction certain
sums set aside for a bonus to be paid to employees, and (2) an error in com puting invested
capital, resulting from improper prorating of prior years' taxes. This latter error is now
admitted by the Commis sioner.

FINDINGS OF FACT.
1.ThetaxpayerisacorporationorganizedunderthelawsofVir ginia with its principal place of business
in Norfolk, Virginia.
2. For the fiscal years ended February 28. 1919, and February 29, 1920, the taxpayer set aside
for each year the sum of $2,000 as a bonustobepaidtoemployees. Noparticularemployeesweredesig
natedtoreceivethebonus. Thetaxpayer,inmakingupthebalance sheets for these years, included the
bonus among the other accounts payable
3. The Commissioner, in determining invested capital for the year ended February 28. 1919, used
as a basis of prorating the previous year's tax the original tax of $12,989.62 paid for the
fiscal vear ended February 28, 1918. Subsequently, the tax for the fiscal year ended February 28
, 1918, was reduced"from $12,989.(52 to $9,- 166.97, but the taxpayer -was not given credit for
this reduction of taxes in determining the invested capital for the subsequent year.
This error is admitted in the answer of the Commissioner.

DECISION.
The action of the Commissioner in disallowing as a deduction the
amountssetasideforabonustobepaidemployeesisapproved. The deficiency should be recomputed to
correct the error admitted in the answer of the Commissioner, and final decision will be settled
on ten days' notice, in accordance with Rule 50.
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