Charleston & W. C. R. Co. v. Commissioner

CHARLESTON & WESTERN CAROLINA RAILWAY CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Charleston & W. C. R. Co. v. Commissioner Docket No. 20836. United States Board of Tax Appeals 17 B.T.A. 569; 1929 BTA LEXIS 2284; September 26, 1929, Promulgated *2284 Certain unclaimed wages, which had been credited to operating expense and allowed as a deduction for the year in which the expense accrued, were subsequently credited to profit and loss. Held that such unclaimed wages constitute taxable income for the year in which they were charged to profit and loss. Robert R. Faulkner, Esq., for the petitioner. F. R. Shearer, Esq., and R. W. Wilson, Esq., for the respondent. SMITH *569 This proceeding is for the redetermination of an alleged deficiency in income tax for the calendar year 1924 in the amount of $55.13. The petitioner alleges error on the part of the respondent in that he included in taxable income certain items of unclaimed wages which petitioner charged to profit and loss during the year 1924. No testimony was offered by either party and from the pleadings we make the following findings of fact. FINDINGS OF FACT. The petitioner is a corporation organized and existing under the laws of the State of South Carolina and is engaged in intrastate and interstate commerce. During the calendar year 1924 and for years prior thereto the petitioner's books were kept upon an accrual*2285 basis and it had been its consistent practice to prepare pay rolls for wages due its employees from time books or other records. The totals of such pay rolls were charged to operating expenses or other appropriate account and credited to pay rolls, a liability account. The pay rolls account was debited each month with amounts actually paid. In December, 1924, an entry was made on the books of petitioner debiting pay rolls and crediting profit and loss with $441.05, representing in the aggregate various items of wages in the pay rolls account due employees for the year 1921 which had not been paid but which had been accrued and claimed and allowed as a deduction in petitioner's income-tax return for the calendar year 1921. This credit to profit and loss was not treated as income in petitioner's annual report to its stockholders, but was included in the ledger liability of profit and loss. It has always been the consistent practice of petitioner to consider all items of unclaimed wages as a definite liability and to pay the employees to whom such wages are due when they are called for without consideration of any statutory period of limitation. *570 OPINION. SMITH: *2286 The only issue presented by this proceeding is whether or not certain items of unclaimed wages which had been charged to operating expenses and allowed as a deduction for the year in which the expense accrued constitute taxable income when subsequently charged to profit and loss. There was presented for our consideration in , an issue practically on all fours with the one raised in the instant proceeding, and after a careful and extensive consideration of the question we approved the respondent's action in including such items in taxable income for the year in which they were charged to profit and loss. Consequently, in accordance with the decision in , the respondent's action in this proceeding is sustained. Judgment will be entered for the respondent.