1932 BTA LEXIS 1529 | B.T.A. | 1932
Lead Opinion
OPINION.
In 1923 the petitioner was the record owner of 90 per cent and George B. Samuel owned 10 per cent of the shares of Holland Laundry. Petitioner was president and a director. By virtue of some contract or arrangement with two others who had formerly been interested in the business and who were in some way perhaps still interested, the petitioner was in some way accountable to these persons. From 1914 through 1922, petitioner had borrowed from the corporation sums which in 1923 aggregated $71,748.94. The corporation was in some sort of difficulty and, at the suggestion of one who was willing to invest in some of its shares, this account was written off the books. For it the petitioner turned in 250 of its preferred shares, having a par value of $12,500, which was accepted at that value, and $601.61 cash. The remaining $58,647.33 was canceled and written off in accordance with the following resolution of the directors adopted at a meeting of July 25, 1923, at which both shareholders were present:
Whereas Hugh H. Miller is indebted to the company to a large amount and Mr. Miller has turned over to the company in liquidation thereof all of his realizable assets, except common stock of this company and such indebtedness is deemed uncollectible, now therefore be it
Kesolved, that $58,647.33 of the account of Hugh H. Miller be charged off as an uncollectible debt, by crediting such account and debiting surplus as of June 30, 1923.
The petitioner omitted from the income shown on his tax return for 1923 any part of this $58,647.33. The respondent, citing Reg. 69, art. 52, held the amount to be a dividend and, by subjecting it to surtax only, he determined a deficiency of $6,876.39. Petitioner contends it was a gift, afitd was therefore excluded from gross income by virtue of section 213(b) (3), Revenue Act of 1921.
Both parties discuss the question whether the amount was collectible from petitioner. That question is beside the point, for in either event, the question remains whether the cancellation was a gift or
There is no support in the evidence for petitioner’s point that the debt was not in fact canceled. Nor is there sufficient evidence to support the suggestion of an accountant that the amount was compensation for past services, so as to justify an increase in the deficiency.
Judgment will be entered for the resfondent.