1930 BTA LEXIS 1960 | B.T.A. | 1930
Lead Opinion
We are of the opinion that the evidence is not sufficient to show that the alleged bad debt was worthless or was ascertained to be worthless in 1924. The item ox $8,500 appears to have been charged off because the petitioner thought that collection thereof was doubtful. The ascertainment of the worthlessness of a debt, either in whole or in part, is the exercise of sound business judgment based upon as complete information as is practically obtainable. As was said by the United States Circuit Court of Appeals for the Ninth Circuit in American Trust Co. v. Commissioner of Internal Revenue, 31 Fed. (2d) 47:
* * * But a debt cannot be written off as worthless merely because it is doubtful. Reasonable and intelligent effort must be made to determine its value, and the circumstances thus discovered must be such as reasonably to generate the belief that it is in fact worthless. * * *
The petitioner appears to have made no investigation of the assets of the Avery Co. The petitioner’s agent testified that he was informed by the bank which handled the sale of the notes that further liquidating dividends would not likely be paid by the Avery Co. sub
Judgment will be entered for the resgondent.