*410OPINION.
The findings as set out in the first eleven paragraphs above were stipulated. Oral and documentary evidence submitted is the basis for the remaining findings of fact.
One of the principal errors alleged in the petition is that the Commissioner changed the basis of petitioner’s returns from an accrual to a cash basis. Upon the hearing and in its brief the petitioner *411contended that the returns filed were made in accordance with the method of accounting employed in keeping its books and should therefore not be disturbed.
It appears from the stipulated facts that, except for adjustments of nontaxable income, the Commissioner did not disturb the gross income reported in its return by the petitioner, nor did he disturb the deductions claimed, except that taxes accrued and death claims accrued but unpaid at the close of each taxable year are disallowed as deductions for such year and are allowed as deductions in the year in which paid. These adjustments are alleged by the petitioner to be erroneous.
There is nothing in the record from which we may determine the method of accounting regularly employed by the petitioner in keeping its books. Not only this, but we lack any evidence of the basis upon which the returns were made (except that the items in controversy were deducted as accruals) and any evidence that would prove that the returns filed were made upon the same basis upon which the petitioner kept its accounts. Such assumptions as we are able to make are based upon a comparison of the computations in the return with those in the deficiency letter and the stipulated fact that, by disallowing these two accruals, the income was placed by the Commissioner upon a “ cash and disbursements basis.”
It is reasonably clear that the gross income, at least, was reported by the petitioner in its return on the basis of cash received, and apparently the petitioner claimed as deductions in 1919 all expenses paid during 'that year and, in addition, death claims accrued but unpaid and taxes incurred on business transacted in that year which were not payable until the following year. If we understand the situation correctly, the result has been that in 1919 the petitioner has claimed as deductions taxes paid in 1919 on its 1918 business and taxes incurred in 1919 on its 1919 business; also unpaid death claims outstanding on January 1, 1919, and paid in 1919, as well as those unpaid on December 81, 1919. There has thus been a duplication of deductible items caused by the fact that prior to 1919 income-tax returns were made by the petitioner on a cash receipts and disbursements basis, with adjustments for reserves. Clearly the basis used by the petitioner in 1919 distorts its income to the extent that there is a deduction in that year of taxes incurred on the business of two years and of death claims unpaid at both the beginning and end of the taxable year.
There is in the record considerable evidence of the basis on which reports are required to be made to the insurance departments of the Commonwealth of Virginia and of the District of Columbia, in which the petitioner operated, b’ut, as stated before, no evidence of the method of accounting employed by the petitioner in keeping its *412books. The evidence concerning the reports to the insurance departments is to the effect that payments and disbursements must be shown upon a cash basis, and assets and liabilities upon an accrual basis. No profit and loss statement upon an accrual basis is required. The form of these reports is not such as to lead us to assume that the books of the petitioner are kept upon an accrual basis. Such assumptions as we can draw from the record would indicate that the petitioner seeks to report its income upon the basis of cash receipts and disbursements, with adjustment in the deductions for taxes accrued and unpaid death claims. The contention is that these accruals must be set up in the balance sheets filed with the insurance departments for the purpose of showing the true financial condition of the petitioner.
We have no doubt that this is so, but it also appears that in such balance sheets the petitioner would be required to set up accrued but uncollected income, such as premiums and interest, and also accrued but unpaid liabilities for commissions, salary, interest and any other such accrued liabilities. The petitioner seeks to report its income upon a cash receipts and disbursements basis with adjustments for only two items of such accruals. This hybrid method of reporting income is not reflective either of correct income or of the progress of the company as shown in its reports to the insurance departments. While it may well be that the cash receipts and disbursements basis adopted by the Commissioner does not reflect the income as accurately as would an accrual system, it appears that it more nearly reflects income than the system for which the petitioner contends. Without any proof of the basis on which the books were kept, or of the adjustments which would be necessary to more nearly reflect the correct income, we must approve the Commissioner’s determination. See United States v. Mitchell, 271 U. S. 9; Appeal of Consolidated Asphalt Co., 1 B. T. A. 79; Appeal of Henry Reubel, 1 B. T. A. 676; Appeal of Estate of E. T. Earl, 4 B. T. A. 322.
At the beginning of 1919 the reserves of the petitioner, as shown upon the balance sheet attached to its return, were $65,920.50. During 1919 this was increased by $100,000.71, which was allowed as a deduction by the Commissioner in addition to claims paid of $304,-367.46. Of the amount of the addition to the reserves so set up and allowed, $28,972.71 was upon account of combined life, health, and accident policies. It is now contended that this was inadequate and that a larger amount would have been added except that the financial condition of the company would not permit it without showing a deficit, and that we should now increase the amount. Section 234(a) (11) of the Revenue Act of 1918 provides that in the case of companies issuing such policies there shall be allowed as a deduction “such portion of the net addition (not required by law) made *413within the taxable year to reserve funds as the Commissioner finds to be required for the protection of the holders of such policies only.” The petitioner computes the deduction which it now seeks as follows:
Gross premiums received_$538, 018.33
Ratio of premiums to reserve as indicated by previous experience (per cent)- 39.26
Necessary reserve ($538,018.33 by 39.26)- 228,834.89
Payments during year_ 185, 223.64
Net addition_ 43, 611.25
The law permits the deduction only of an addition made to a reserve and it may be doubted whether any deduction could be allowed where, as here, the addition which it is sought to deduct has not been made. However that may be, the computation discloses that the losses paid and the addition to the reserve totaled 36.74 per cent of the premiums received. This is slightly in excess of the ratio established by the losses of the preceding twd years. Whether the petitioner should use a ratio of 36.74 per cent, based- on two years’ experience, or 39.26, based on five years’ experience, was a matter which rested, to some extent at least, in the discretion of the officers of the petitioner. Furthermore, the amount to be added to the reserve may well have been affected to some degree by an examination of the balance sheets to determine whether the reserves set aside in previous years had been adequate or inadequate. Nor are we impressed with the argument that a greater reserve would have been set up had the financial condition warranted it, for it appears that in March, 1920, the petitioner paid dividends of $20,000 to its stockholders, only a small portion of which were paid from 1920 earnings. The determination of the Commissioner must be approved.
The deficiencies for 1919 and 19W are redetermined to be $6,088.96 and $1,301.77, respectively. Order will be entered accordingly.