The opinion
Before STERNHAGEN and LOVE.
The Commissioner determined a deficiency of $949.61 income and profits tax for 1919 by including in
gross income an amount of $6,195 received by the petitioner as the last payment on account of the
principal of a loan existing in 1911, and an amount of $11,413.18 received in that year as
accumulated interest on the original loan.
FINDINGS OF FACT.
On September 1, 1911, the petitioner had loaned to a partnership the sum of $105,000 on demand
negotiable notes secured by negotiable bills of lading and warehouse receipts. Some of the bills of
lading and warehouse receipts were forgeries. Some payments were made, or in some other way the
account was reduced to a balance outstanding on November 3, 1911, of $71,317.78. On November 3,
1911, a national bank examiner was examining the petitioner's books, and he suggested that the
petitioner immediately charge off $70,000 of the account, which the board of directors thereupon
authorized on November 4, 1911. Of this $70,000 charged off, payments amounting to $13,805 were
received up to June 30, 1913. Later one of the partners wanted to borrow $10,000 from the
petitioner, which the petitioner would only lend with a satisfactory assurance of repayment of the
$70,000. One of the partners wrote the petitioner a letter in which he said he reacknowledged the
debt and intended to pay it. He gave notes for the amount, signed by him and his brother, and
payments were made of $20,000 in 1917, $30,000 in 1918, and $6,195 in 1919. In 1919 interest on the
account was received of $11,413.18.
The deficiency should be computed by excluding $6,195 from petitioner's income for 1919.
Judgment accordingly will be settled on 15 days' notice, under Rule 50.