Forstmann v. Commissioner

1927 BTA LEXIS 3625 | B.T.A. | 1927

Lead Opinion

OPINION.

Marquette :

The Commissioner filed a plea in bar to the right of the petitioner to maintain his appeal as to the year 1917, on the ground that “ there has not, since the enactment of the Eevenue Act of 1924, been a determination by the Commissioner that a deficiency in tax is due from the taxpayer for the year 1917.”

The tax herein was assessed prior to the enactment of the Eevenue Act of 1924 and the amount of the deficiency was finally determined by the Commissioner after the enactment of that Act. An appeal from the final determination of the deficiency was taken to this Board and the appeal was pending before the Board at the time of the enactment of the Eevenue Act of 1926. That we have jurisdiction of the appeal is settled by section 283 (f) of the Eevenue Act of 1926, which provides:

If any deficiency in any income, war-profits, or excess-profits tax imposed by the Revenue Act of 1916, the Revenue Act of 1917, the Revenue Act of 1918, or the Revenue Act of 1921, or by any such Act as amended, was assessed before June 3, 1924, but was not paid in full before that date, and if the Commissioner after June 2, 1924, but before the enactment of this Act finally determined the amount of the deficiency, and if the person liable for such tax appealed before the enactment of this Act to the Board and the appeal is pending before the Board at the time of the enactment of this Act, the Board shall have jurisdiction of the appeal. * * *

See also Appeals of Elizabeth W. Stranahan, 4 B. T. A. 1141; Nice Ball Bearing Co., 5 B. T. A. 484; and William A. Slater Mills, Inc., 5 B. T. A. 971.

The only other issue raised herein is whether or not the petitioner, in computing his net income for the years 1917 to 1921, inclusive, is entitled to deduct in each year the amount of $18,000 drawn by him from the Forstmann-Hufi'man Co. to cover traveling and entertainment expenses incurred by him in behalf of and for the benefit of the company, and to deduct the amount of $14,500 paid by him in the year 1918 to Charles F. H. Johnson. The Commissioner does not contend that the expenses incurred by the petitioner in traveling and entertainment on behalf of the company are not deductible but urges that the petitioner has failed to show that the amounts drawn from the company for that purpose were in fact spent by him.

We have carefully considered the testimony adduced as to this issue which is at length and can not be set forth in detail here, and we are of the opinion that in each of the years 1917 to 1921, inclusive, the petitioner expended on behalf of and for the benefit of the Forstmann-Huilman Co. at least $18,000.for traveling, entertainment and other legitimate business purposes, and that, inasmuch as he has included in his income for those years the entire $18,000 drawn by him from the company for these purposes, he is entitled to deduct the amount thereof actually expended.

With regard to the amount of $14,500 paid by the corporation to the petitioner to reimburse him for the amount paid by him to Johnson as the corporation’s share of maintaining Johnson at Washington as a representative of the Passaic industries, a different situation exists. That was clearly a direct corporation expense and had no connection with the services which the petitioner rendered to the corporation and for which he received compensation. In our opinion, the amount so received by the petitioner from the corporation should not be included in his gross income; neither should he be permitted to deduct the amount paid to Johnson.

Judgment will be entered on 15 days’’ notice, under Rule 50.