Mitten v. Commissioner

ROBERT MITTEN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Mitten v. Commissioner Docket No. 10891. United States Board of Tax Appeals 11 B.T.A. 731; 1928 BTA LEXIS 3734; April 20, 1928, Promulgated *3734 Certain deductions to which the petitioner is entitled in computing his net income for the year 1922, determined. Robert Mitten pro se. Alva C. Baird, Esq., for the respondent. MARQUETTE *731 This proceeding is for the redetermination of a deficiency in income tax asserted by the respondent for the year 1922 in the amount of *732 $274.52. The petitioner alleges that the respondent erred in disallowing the following credits and deductions which the petitioner claimed on his return: (1) A credit for a dependent mother; (2) a worthless debt in the amount of $1,008; (3) $480 as expense of operating an automobile; (4) amusement tax in the amount of $175; (5) $2,400 as alimony paid to a divorced wife; (6) a credit of $2,400 to which the petitioner is entitled as a married man supporting a minor child. FINDINGS OF FACT. The petitioner is an individual residing at Chicago, Ill. He was, during the year 1922, a married man living with his wife and supporting her and his minor child. Prior to and during the year 1922 the petitioner's mother was paralyzed and unable to care for herself. She had no income or means of supporting herself*3735 and was wholly dependent upon her children. She lived with and was cared for by her daughter, while the petitioner and his brother furnished the money needed for her support, the petitioner furnishing the money one year and the brother the next. The petitioner furnished the money necessary for his mother's support in the year 1922. During the year 1922 the petitioner loaned money in small sums to the Murphy Manufacturing Co. This company was not incorporated but was organized as a common-law trust. It was trying to develop and perfect an automobile appliance but was not successful. In the latter part of 1922 the Murphy Co. went out of existence, becoming merged with the Universal Machinery Co., an Indiana corporation. The petitioner kept no books of account except a memorandum book, in which he entered the loans made to the Murphy Co. These totaled $1,016, of which amount $230.65 was repaid to the petitioner. When the Murphy Co. went out of business it had no assets and the petitioner was unable to recover the remainder of his loans. The petitioner during the year 1922 allowed the Murphy Co. to use his automobile in connection with its business. He paid for the upkeep, *3736 gasoline, Etc. In December, 1922, it was agreed between the Murphy Co. and the petitioner that the petitioner should be reimbursed for the use of his car in the amount of $40 per month. In his income-tax return for the year 1922 the petitioner claimed a credit of $200 on account of his dependent mother, a deduction of $1,008 on account of the loans made to the Murphy Co., a deduction of $480 for the expense of operating the automobile used by the Murphy Co., $175 as an amusement tax, $2,400 as alimony paid to his divorced wife, and $2,400 as a married man supporting a minor child. The alleged errors Nos. 4 and 5 were abandoned at the hearing. *733 As to error No. 6 the respondent conceded that the petitioner during the year 1922 was a married man supporting a minor child, and that he is entitled to a credit of $2,400 therefor. OPINION. MARQUETTE: From the facts as found, it is apparent that the petitioner's mother was physically incapacitated and wholly dependent upon him for her support during the year 1922. He is therefore entitled to a credit under section 216(d) of the Revenue Act of 1921 of $400. *3737 We think the facts show that the petitioner is entitled to a deduction for a bad debt under section 214(a)(7) of the Revenue Act of 1921. He was in close touch with the company to which he loaned the money and in a position to know of the collectibility of the debt. He found it to be worthless and it appears from the evidence that it was in fact worthless. As he kept no books of account no formal book entry of charge-off as mentioned in the statute was necessary in his case. See ; ; . However, the petitioner is not entitled to a deduction of the full amount, $1,008 claimed by him. The evidence shows that the net amount of the debt ascertained to be worthless was $785.35, and that is the amount which should be allowed as a deduction. The petitioner's claim of $480 as a deductible allowance for the upkeep of an automobile can not be sustained. The machine was used, not in the petitioner's business, but in the business of another person. Furthermore, there is no evidence to show the amount the petitioner actually expended in*3738 its upkeep and operation. The petitioner should be allowed credit on account of the support of his mother, and deduction for bad debt as set forth above in this opinion. He should also be allowed a credit of $2,400 on account of his wife and minor child, as conceded by the respondent. The respondent's determination as to the other claimed deductions and credits is sustained. Judgment will be entered on 15 days' notice, under Rule 50.