Askin & Marine Co. v. Commissioner of Internal Revenue
| Decision Date | 29 August 1933 |
| Docket Number | No. 417.,417. |
| Citation | 66 F.2d 776 |
| Court | U.S. Court of Appeals — Second Circuit |
| Parties | ASKIN & MARINE CO. v. COMMISSIONER OF INTERNAL REVENUE. |
Charles D. Hamel, of Washington, D. C., Alexander Appel, of New York City, and Benj. H. Saunders, of Washington, D. C. (Hamel, Park & Saunders and Edward M. Woolf, all of Washington, D. C., of counsel), for petitioner.
Sewall Key and Norman D. Keller, Sp. Assts. to Atty. Gen., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and Hugh Brewster, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., for respondent.
Before MANTON, SWAN, and CHASE, Circuit Judges.
The petitioner, a New York corporation having its principal office in New York City, operated a chain of retail clothing stores. Its merchandise was sold on credit. The purchaser was required to make a payment at the time of sale and to agree to pay the remainder of the purchase price in weekly installments. A card was kept at the principal office for each customer on which a record of sales and payments were made from daily reports from the various stores. These cards, from 70,000 to 75,000 in number, were kept in files designated respectively as active and delinquent. The delinquent file contained the cards of customers who had made no payment for sixty days and had for that reason been transferred from the active file. It was the regular practice of the petitioner from 1917 through 1920 to charge off as bad debts and deduct from its gross income all accounts in the delinquent file at the end of each year. In addition to this, it charged off from the total of the accounts in the active file a sum approximating the difference between its sales for the year and the amounts actually collected. It is now admitted that there was no ascertainment of the worthlessness of accounts charged off the active file and no attempt made to do that. The effect of this method was to permit the petitioner to keep its books on the accrual basis and account for purposes of taxation on an arbitrary adjustment which put it as close to a cash receipt and disbursement basis as it desired.
On December 27, 1919, the petitioner charged off as bad debts and deducted from its gross income for 1919 in all $621,176.47. Of this $310,083.62 was charged off the active file. At the end of 1920, the petitioner charged off as bad debts and deducted from its gross income for that year $655,800.32. Of this $280,876.48 was from the active file. During 1920 the petitioner collected $5,459.24 from accounts it had charged off in 1917; $13,354.89 from those it had charged off in 1918; and $289,690.22 from accounts charged off in 1919. Of the total of $308,504.35 so collected, $276,728.40 was from accounts charged off the active file. Until the 1920 return the petitioner's practice in this regard was not questioned. An investigation led to a refusal by the commissioner to allow as a deduction for that year (other years are not in issue on this appeal) the amounts charged off the active file in 1920; to exclude from gross income collections in 1920 on accounts previously charged off; and to adjust invested capital accordingly.
The petitioner had included in gross income in previous years the collections it made on accounts charged off, but upon its acquiescence in the position that the charging off of accounts before it ascertained them to be worthless had been erroneous it claimed that collections from such accounts could not be income in the year collected; and further that accounts receivable erroneously charged off at the end of 1919 should be added to invested capital for 1920.
The petitioner bears heavily upon the fact that its practice in charging off these accounts was uniform in the years up to and including 1920 and that it "raised no question here and desired only to continue." It appears to believe that such a practice so continued...
To continue reading
Request your trial
-
Putoma Corp. v. Comm'r of Internal Revenue
...held that the recovery of a fire loss previously deducted must be included in income in the year of recovery. Askin & Marine Co. v. Commissioner, 66 F.2d 776 (2d Cir. 1933), affg. 26 B.T.A. 409 (1932), held that the recovery of a debt previously deducted was includable in income in the year......
-
Gmelin v. Commissioner
...Kahn v. Commissioner 40-1 USTC ¶ 9157, 108 F.2d 748, 749 (2d Cir. 1940); Askin & Marine Co. v. Commissioner 3 USTC ¶ 1155, 66 F.2d 776, 778 (2d Cir. 1933); Commissioner v. Liberty Bank & Trust Co. 3 USTC ¶ 932, 59 F.2d 320, 325 (6th Cir. 1932). The parties have not indicated, and our resear......
-
Grand Central Public Market v. United States
...of this general proposition: (1) Comr v. Liberty Bank & Trust Co., 6 Cir., 59 F.2d 320, 11 A.F.T.R. 488; (2) Askin & Marine Co. v. Com'r., 2 Cir., 66 F.2d 776, 12 A.F.T.R. 1306; (3) Houston Production Co. v. U. S., D.C., 4 F.Supp. 715, 12 A.F.T.R. 1441; (4) Burnet v. San Joaquin Fruit & Inv......
-
Mayfair Minerals, Inc. v. Comm'r of Internal Revenue, Docket No. 5409-68.
...is required to follow the tax-benefit rule even though the original deduction was erroneous. Thus, in Askin & Marine Co. v. Commissioner, 66 F.2d 776 (C.A. 2, 1933), affirming 26 B.T.A. 409 (1932), the taxpayer took deductions for debts which, concededly, were not actually ascertained to be......