Appeal of Joseph E. Reid Estate

[1199] OPINION. Green: The decision in the Appeal of Steele Cotton Mill Co., 1 B. T. A. 299, is clearly applicable to this appeal.1 In that appeal the Board held that, under section 234(a)(5) of the Revenue Act of 1918, the taxpayer must have ascertained the whole debt to be worthless and have charged it off within the taxable year in order to be entitled to any deduction from his income. In this appeal taxpayer claimed to have ascertained for the year 1918 that 50 per cent of the debt was worthless, but this was not an ascertainment as to the whole debt. That was ascertained some time within the year 1919 and the remainder of the debt was charged off during that year. Under the decision in the Steele Cotton Mill Appeal, supra, the claim for deduction in 1918 was properly disallowed. But the deficiency found by the Commissioner for 1919 can not be sustained under the facts as we have found them to exist. The firm, before the close of that year, ascertained that the whole debt was worthless. It was, therefore, entitled to charge off the whole debt during that year and claim [1200] a deduction from its income for that year of the entire amount remaining unpaid. The account of String-fellow should be allowed as a deduction as a bad debt of the partnership -for the year 1919 and the tax computed accordingly for the years in question. Footnotes [1] See also Appeals of The Murchison National Bank, 1 B. T. A. 617; Farmers’ Hardware Co., 2 B. T. A. 90; and Cherry Basset Co., 2 B. T. A. 426.