Davidson Grocery Co. v. COMMISSIONER OF INTERNAL REVENUE, Docket No. 10072.
| Decision Date | 28 November 1927 |
| Docket Number | Docket No. 10072. |
| Citation | 9 BTA 390 |
| Parties | DAVIDSON GROCERY CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Board of Tax Appeals |
George E. H. Goodner, Esq., for the petitioner.
J. E. Marshall, Esq., for the respondent.
This is a proceeding for the redetermination of a deficiency in income and profits tax for the calendar year 1919, in the sum of $3,821.79. The petitioner admitted a deficiency of $1,443.06, but disputed the remainder, or $2,378.73, alleging that the latter amount arose from the refusal of the Commissioner to allow certain deductions for losses sustained during the taxable year in the sum of $8,920. At the trial the petitioner waived its claim on all but $1,000 alleged to be a loss sustained during the taxable year on one book account.
FINDINGS OF FACT.
The petitioner was incorporated in 1903, under the laws of the State of Idaho. Its principal office is at Boise, Idaho, where it conducts a wholesale grocery business.
During the year 1919, an account in the name of R. F. Passmore was carried on its books. R. F. Passmore conducted a business under the name of Capitol Grocery. The balance due the petitioner on this account on December 31, 1919, as shown by its original ledger sheets was $3,453.78. The following entry appears on a separate ledger sheet:
R. F. Passmore, City
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Reg. | Date | Item | Charge || Date | Item | Credit || Date | Balance
No. | | | || | | || |
-----|---------|--------|--------||---------|------------|---------------------------------||---------|---------
| 1919 | | || | | || |
143 | Dec. 23 | ______ | ______ || Dec. 23 | Csh ______ | 1,000.00 profit and loss ______ || Dec. 23 | 1,000.00
| | | || | | To other a/c see other sheet. || |
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This credit did not appear upon the regular ledger sheet showing the Passmore account, nor was it shown on the monthly statements sent to R. F. Passmore, because the petitioner did not want the debtor to know that this amount had been charged off. The charge-off was made by the bookkeeper under the direction of the petitioner's president.
It was customary in the petitioner's business for the president to go over the accounts in December of each year to determine which accounts were bad. Those that he considered entirely bad he had charged off in toto and from those thought to be partially bad he had charged off amounts which he thought would reduce them to their true values. Upon the account in dispute he could not determine in 1919 the exact amount of loss which he considered the account represented. Later charge-offs were made in subsequent years on the R. F. Passmore account, as follows:
Year Amount
1921 __________________________________ $1,085.51
1924 __________________________________ 300.97
1926 __________________________________ 476.18
R. F. Passmore continued to trade as the Capitol Grocery until the latter part of July, 1921, when he made an assignment of the business to the Boise Association of Credit Men. During the entire period from 1919 until this assignment he continued...
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