SecProbe.io

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Mail Stop 3-8

      							 May 26, 2005

By Facsimile and U.S. Mail

Mr. D. Gary McRae
McRae Industries, Inc.
President, Treasurer and Director
400 North Main Street
Mount Gilead, NC 27306

      Re:    McRae Industries, Inc.
      	Form 10-K/A for the year ended July 31, 2004
      	Filed December 23, 2004
      	File No.  1-08578

Dear Mr. McRae:

	We have reviewed your response dated April 15, 2005 to our
comment letter dated March 17, 2005 and have the following
additional
comment.   Please understand that the purpose of our review is to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects.  Feel free
to
call us at the telephone numbers listed at the end of this letter.
Form 10-K/A for the Year Ended July 31, 2004 as Amended

Consolidated Statements of Operations, page 24

1. Your Articles of Incorporation state you may pay dividends on
each
share of Series A in excess of dividends paid on each share of
Class
B or without paying any dividends on shares of Class B.  Because
of
this provision, we view Class B Common Stock to be a participating
security that possesses different participation rights in
undistributed earnings than those rights possessed by Class A
Common
Stock.  Therefore, you are required to use the two-class method to
compute basic earnings-per-share ("EPS") and the if-converted
method
to compute diluted EPS.  In doing so, you should allocate
distributed
earnings to the rightfully designated A or B Classes, if
applicable,
and undistributed or remaining earnings should be allocated
completely to Class A Common Stock as if all of the earnings for
the
period had been distributed.

Please compute basis EPS for Class A and use all distributed
earnings
with respect to Class A and 100% of undistributed earnings as your
numerator and the weighted average number of Class A shares
outstanding as your denominator.  For Class B basic EPS you should
use all distributed earnings with respect to Class B and no
undistributed earnings as your numerator and the weighted average
number of Class B shares outstanding as your denominator.  For the
diluted EPS computation, your numerators will remain consistent
with
basic EPS computations.  Your denominator for Class A will consist
of
all Class A and B shares assuming conversion of Class B.  Class B
shares will serve as the denominator for the computation of Class
B.

Since this allocation may not reflect the economic reality of
actual
future allocations to Class B shareholders, please include
disclosure
clarifying that the basis for the pro forma distribution to Class
A
shareholders is based on the right each class of common stock
possesses concerning undistributed earnings such that
distributions
to Class B shareholders may be avoided.  Please show us what your
revised disclosure will look like.

	Please send us your response to our comment within 10
business
days from the date of this letter or tell us when you will provide
us
with a response.  Please understand that we may have additional
comments after reviewing your response to our comment.  Your
supplemental response letter should be submitted in electronic
form
on EDGAR as a correspondence file.  Refer to Rule 101(a) of
Regulation S-T.

		If you have any questions regarding our comments, please
direct them to Brian V. McAllister at (202) 551-3341 or, Donna Di
Silvio at (202) 551-3202, or in her absence to the undersigned at
(202) 551-3841.

									Sincerely,

									Michael Moran
									Accounting Branch
Chief
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Mr. D. Gary McRae
McRae Industries, Inc.
May 26, 2005
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