1930 BTA LEXIS 2434 | B.T.A. | 1930
Lead Opinion
The petitioner contends that the inventory valuations shown in its original return and used by the respondent in his computation are erroneous in that both the opening and the closing inventories were overvalued in the manner above described. The evidence before us fairly supports this contention, but the result obtained is a net increase of trading profit on lumber of $1,228.17 over that determined by the respondent.
We think that the petitioner is entitled to the deduction of the bad debts disallowed by the respondent. The debts were all reasonably ascertained to be worthless during the taxable year by officers of the company acting with full authority in the matter and in performance of their ordinary duties. This action of the officers was approved by the directors at their next meeting held on August 2, 1924, and the book entries showing the charge to profit and loss account were made on September 1, prior to the date on which the petitioner filed its income-tax return. It was intended by the petitioner’s officers that the accounts should be charged off as of the taxable year ended June 80, 1924, and deducted from income of that year. We said in Webster & Atlas National Bank, 18 B. T. A. 1200, that:
* * * We have consistently held that the ascertainment of worthlessness, by those with authority to act for the taxpayer, within the taxable year is the essential requirement of the statute and that the charge-off must occur substantially as of the date of the ascertainment of worthlessness. See Mason Machine Works Co., 3 B. T. A. 745; George S. Fraser, 6 B. T. A. 997; First National Bank, Danville, Ind., 11 B. T. A. 671; St. Joseph Talley Bank, 15 B. T. A. 185.
Under this rule of construction we think that the petitioner has complied substantially with the requirements of the statute in respect to the debts in question.
The respondent has conceded the petitioner’s remaining contention that it is entitled to a deduction of $2,202.61 on account of taxes paid or accrued during the taxable year.
Judgment will be entered wider Bule 60.