APPEAL OF MENKEN
| Citation | 8 BTA 1062 |
| Decision Date | 29 October 1927 |
| Docket Number | Docket No. 5771. |
| Parties | APPEAL OF S. STANWOOD MENKEN |
| Court | U.S. Board of Tax Appeals |
B. B. Pettus, Esq., Edward Clifford, Esq., and Wilton H. Wallace, Esq., for the petitioner.
A. H. Fast, Esq., for the Commissioner.
This is an appeal from the determination of a deficiency in income tax for the year 1918 in the amount of $2,715.20. The deficiency arises from the Commissioner's action in refusing to allow as a deduction from petitioner's gross income in 1918, an amount of $11,666.66 representing an alleged bad debt.
FINDINGS OF FACT.
Petitioner is an individual residing in the City of New York, where he is actively engaged in the practice of law as a member of a partnership in which he owned a one-third interest during 1918 and for many years prior thereto.
During the fall of 1909 the law partnership was engaged by four individuals to render services in connection with the acquisition and consolidation of various independent telephone lines of the country and in the formation of the Continental Telegraph & Telephone Co. The four individuals were John A. Howard, Herman Stieffel, Max Koehler, and Samuel O. Harper. A large amount of time was spent on the matter by the partnership during 1909, 1910, and 1911. The proposed merger failed in 1911 and was abandoned. In 1911 Howard, one of the active parties, failed and went into bankruptcy. Some time in 1912 it was verbally agreed between the petitioner and John A. Howard that under the circumstances a reasonable fee for services rendered would be $35,000. Prior to the agreement in 1912, no definite fee for services had been agreed upon between the parties involved. The partnership was on a cash receipts and disbursements basis. It does not appear when, if at all, the account was charged on its books and it was never charged off. There is no evidence as to how, if at all, petitioner kept his personal books.
No part of the fee of $35,000 was ever received by the partnership or petitioner. No statement or bill for services was ever rendered, and little effort was made to collect the account. No action at law was brought against any one to force collection. Howard was a bankrupt and unable to pay, but Stieffel, Koehler and Harper were men of considerable means.
In his income-tax return for 1918, the petitioner deducted $11,666.66, one-third of the fee of $35,000, from his gross income as a debt ascertained to be worthless and charged off during the taxable year. The Commissioner disallowed such deduction and determined the deficiency now in controversy.
From the record of this case it appears that p...
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