The opinion
Love:
This proceeding is for the redetermination of a deficiency in income tax for the year 1924 in the amount of $158.24.
The only error assigned is that the Commissioner refused to allow as a deduction from gross income of the year 1924, $5,000 which *250 petitioner paid in a compromise settlement of a suit against him by George L. Danforth.
BINDINGS OP PACT.
The petitioner is an individual who resides in East Chicago, Ind.
In 1912, the petitioner and George L. Danforth entered into a contract agreement by which petitioner authorized the said Danforth to act for him and in his behalf in the sale of a certain patent or rights under such patent. Sometime subsequent to 1912, the controversy arose between the petitioner and Danforth, in regard to a claim, or claims by Danforth for commissions due him for services rendered.
In 1920, Danforth filed suit against the petitioner on said claims. In 1924, a compromise agreement was made between them to the effect that petitioner should pay to Danforth $10,000 in full settlement of all claims against the petitioner.- In pursuance of that agreement, petitioner paid to Danforth, on December 15,1924, $5,000 in cash.
Petitioner keeps his books and makes his returns on a cash receipts and disbursement basis and on his return for 1924, deducted that $5,000 payment from his gross income. The Commissioner disallowed the deduction and determined a deficiency.
Payment of the $5,000 was an ordinary and necessary expense, deductible in the year paid— 192J¡.. Judgment of no deficiency will be entered.
Considered by Teussell, Smith, and Littleton.