H. Harwood & Sons, Inc. v. Commissioner

APPEAL OF H. HARWOOD & SONS, INC. H. Harwood & Sons, Inc. v. Commissioner Docket No. 4243. United States Board of Tax Appeals 2 B.T.A. 1293; 1925 BTA LEXIS 2075; November 11, 1925, Decided Submitted October 8, 1925. *2075 Lawrence E. Green, Esq., for the taxpayer. Thos. P. Dudley, Jr., Esq., for the Commissioner. *1293 Before LITTLETON, SMITH, and TRUSSELL. This is an appeal from the determination of a deficiency in income and profits tax for the calendar year 1921 in the amount of $3,824.08. The issue presented is whether the Commissioner erred in refusing to allow the taxpayer to deduct from gross income for the year 1921 interest on its indebtedness for years prior to 1921 which was paid in that year. FINDINGS OF FACT. Taxpayer is a Massachusetts corporation, engaged in the manufacture of baseballs, with principal office at Natick. It kept its books and rendered its returns for 1921 and prior years upon the accrual basis. During the taxable year and in years prior thereto the principal officer and stockholder of the taxpayer loaned it various sums of money, for which the company gave him its promissory notes from time to time, payable on demand. These notes bore no interest on their face, but it was understood and agreed between the maker and the payee that the notes should bear interest payable on demand at the going rate. In the year 1921 the taxpayer, upon*2076 demand, paid interest on its indebtedness of the character above mentioned for the years 1919, 1920, and 1921, in the amounts of $1,363.55, $4,763.25, and $2,217.19, respectively. The Commissioner allowed the taxpayer a deduction for the year 1921 of the interest accrued upon its indebtedness in that year, and disallowed as a deduction the interest upon its indebtedness for 1919 and 1920 which was not paid until 1921. *1294 DECISION. The determination of the Commissioner is approved. ; .