First National Bank v. Commissioner

[673] OPINION. Murdock: Section 234 (a) (5) of the Revenue Act of 1921 provides for the deduction of— Debts ascertained to be worthless and charged off within the' taxable year * * *. The language of the Act i,s unambiguous and unmistakably requires compliance with both conditions before a deduction may be allowed for the purpose of computing net income subject to taxation. Mason Machine Works Co., 3 B. T. A. 745. In the present case we are not convinced that the petitioner, in the year 1921, ascertained any one of these debts to be worthless. There was only one witness called by the petitioner. He was the cashier. He stated that in 1921, he considered the notes to be worthless, but that the president controlled the affairs of the bank and would not allow the charge-off in 1921. It was not until February 7, 1922, that the petitioner determined to charge off the notes as worthless and made the charge-off on its books. While in some circumstances a charge-off on February 7th might be allowed as of the end of the preceding year, in this case it does not appear that the charge-off was intended to be made as of the end of 1921, to close the books for that year. Judgment will he entered for the respondent.