Grossman v. COMMISSIONER OF INTERNAL REVENUE

• Decision Date: 17 December 1927
• Docket Number: Docket No. 8290.
• Parties: JACOB GROSSMAN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
• Court: U.S. Board of Tax Appeals

9 B.T.A. 643 (1927)

JACOB GROSSMAN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 8290.

Board of Tax Appeals.

Promulgated December 17, 1927.

Jacob Bennett, C. P. A., for the petitioner.

Bruce A. Low, Esq., for the respondent.

The respondent has determined a deficiency in income and profits tax for the year 1920 in the amount of $346.30. The deficiency arises from the disallowance by the respondent of petitioner's claim for the deduction from gross income of $2,000 as a bad debt.

FINDINGS OF FACT.

The petitioner is an individual residing in the City of New York. During the taxable year he was engaged in the business of merchant tailoring at 54 Maiden Lane. Some time during the fall of 1919, he sent $2,000 by money order to his son in St. Louis, as requested by the son, Herbert K. Grossman, then 23 years of age. No security or note was given; no agreement was had for the payment of interest; nor was there any understanding had as to a definite time of repayment. With the $2,000, and some little money of his own, saved during his previous employment as a salesman, the son purchased an interest in the Cramer Garment Co. of St. Louis. In the summer of 1920, petitioner was advised, by letter from his son, that the liabilities of this concern far exceeded its assets, and that a settlement was being considered with the creditors for 33 1/3 per cent of their claims, which would leave nothing for stockholders. The same letter contained the statement, "I will pay you every cent I owe you. Don't lose faith in me." Money was forwarded by petitioner for Herbert's return to New York, where he entered his father's business and was allowed approximately $60 per week.

OPINION.

LANSDON:

The determination of petitioner's claim depends, first, upon the question whether this debt had an existence in fact. No deduction can be allowed from his gross income, as a bad debt, unless the existence in fact of the debt is established. Appeal of Luke & Fleming, Inc., 1 B. T. A. 12.

The petitioner testified that the repayment of the alleged loan "was dependent on his the son's success in life, sooner or later, and at the present time he has not succeeded so that he could not pay it." He also testified that, since the failure of the Missouri enterprise, he had advanced money to be used for the support of the wife and children of the son, and that he had continued to make such advances "to keep his body and soul together," and that he regarded such action as no more than "every father would do for any son whom he...