Keenan v. Commissioner

ROBERT B. KEENAN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Keenan v. Commissioner Docket No. 29108. United States Board of Tax Appeals 20 B.T.A. 498; 1930 BTA LEXIS 2108; August 6, 1930, Promulgated *2108 Payment of ordinary and necessary business expenses with borrowed money does not postpone the deduction on account thereof to the year in which the borrowed money is repaid. Robert B. Keenan, Esq., pro se. L. A. Luce, Esq., for the respondent. LANSDON *499 OPINION. LANSDON: The respondent asserts an aggregate deficiency for the years 1924 and 1925 in the amount of $207.39. For his cause of action the petitioner asserts that he is entitled to certain deductions from his income in each of the taxable years on account of professional expenses paid in such years. In 1922, 1923, and 1924 the petitioner acted as an attorney for certain restricted Indians who were members of what are known as the Five Civilized Tribes. In connection with this service he incurred expenses in a total amount in excess of $6,000. To pay such expenses he borrowed money from a bank and from other sources and did not repay the same until in 1924 and 1925. The petitioner claims that the amount of $6,000 is deductible from his income in 1924 as ordinary and necessary business expenses and that other amounts are deductible in 1925. The petitioner admits that the*2109 expenses which he seeks to deduct from his income in each of the taxable years were incurred in prior years, but contends that inasmuch as payments were made in such years with borrowed money, the amounts thereof are deductible in the years in which the loans were repaid. The Board is unable to agree with this contention. The law provides for the deduction from gross income of all ordinary and necessary expense incurred or paid in the taxable years. Section 214(a)(1), Revenue Act of 1924. In the instant case the expenses were both incurred and paid prior to the year here in controversy. That the payments were made with borrowed money is not material and can not have the effect of postponing the deductions until the years in which the borrowed money was repaid. To hold otherwise would in effect permit taxpayers to elect the years in which expenses might be deducted from income and would do violence to the generally accepted principle that taxes are to be computed on a yearly basis. Cf. . Decision will be entered for the respondent.