1926 BTA LEXIS 2359 | B.T.A. | 1926
Lead Opinion
OPINION.
The taxpayer claims the right to deduct from gross income in its income-tax return for 1920 amounts totaling $5,646.95, paid to subcontractors who had filed mechanics’ liens against its
The Commissioner has disallowed the deduction upon the ground that the amount paid to subcontractors was a part of the cost of the building. We are of the opinion, however, that in no proper sense was this so. The taxpayer had neglected to take a proper business precaution and had paid the general contractor without receiving a release from persons who had furnished material and performed labor upon the building. By reason thereof it was compelled to pay a sum of money in settlement of liens filed and judgments obtained by subcontractors and material men. The general contractor was insolvent and the taxpayer had no way of recovering its loss. The loss sustained was deductible from gross income. Electric Reduction Co. v. Lewellyn, 11 Fed. (2d) 493.
Judgment for the -petitioner.