The opinion
EARL KING, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
King v. Commissioner
Docket No. 9942.
United States Board of Tax Appeals
9 B.T.A. 502 ; 1927 BTA LEXIS 2565 ;
December 9, 1927 , Promulgated
*2565 Certain professional and business losses and expenses allowed and personal expenses disallowed.
Earl King pro se.
Brice Toole Esq., for the respondent.
LANDSDON
*502 The Commissioner has asserted deficiencies in income taxes for the years 1920 and 1921, in the respective amounts of $58.45 and $409.54. The petitioner alleges that the Commissioner erred in disallowing certain claimed deductions from gross income in each of the taxable years.
FINDINGS OF FACT.
The petitioner is an individual who resides in Memphis, Tenn., where, in the taxable year, he was engaged in trading, in the practice of law and, jointly interested with others, in the operation of a farm for profit. During the taxable years he kept no books other than memorandum records placed in the general office file of any particular case or matter which was pending. He was his own representative at the hearing of the proceeding, and his testimony was the only evidence offered in support of the allegations of the petition.
*503 In his income-tax returns for 1920 and 1921, the petitioner claimed certain deductions from gross income, of which the following were disallowed *2566 by the respondent: 1920
Traveling expenses $102.39
Expenditures at Memphis Country Club, for entertainment of clients 96.80
Bad debts 161.00
Contribution to Phi Delta Theta 15.75
Total 375.94
1921
Bad debts 435.00
Loss in automobile trading 268.00
Interest and brokerage on loan 236.70
Farm losses 110.00
Professional expenses not collected 342.60
Loss on Yellow Cab stock transaction 150.00
Professional books for home library 80.00
Depreciation on dwelling 325.00
1,947.30
The amount of $102.39 was incurred in travel expenses in 1920 in connection with the petitioner's practice of his profession. During the same year he incurred expenses in the amount of $96.80 in the entertainment of clients at the Memphis Country Club.
The debt of $435, deducted from the petitioner's gross income in 1921, was the balance of an amount which the petitioner had loaned to one Nebhut, who died insolvent and wholly without resources in the taxable year. Some time in 1921, the petitioner bought an automobile and paid therefor the amount of $400, and paid $168 to have it conditioned for resale. This car was never used by the petitioner, *2567 was purchased solely for the purpose of resale at a profit, and was sold in the taxable year for $298.
The petitioner built a residence for himself in 1921 and borrowed the amount of $2,000 to pay part of the cost thereof. In securing such loan he incurred a brokerage expense in the amount of $116.70, and, during the taxable year, paid $120 interest on such loan. The respondent has allowed the deduction of the interest.
In 1921 the petitioner was one of the joint owners and operators of a farm conducted for profit. He incurred an expense of $110 for farm machinery, which was abandoned during that year. The abandoned machinery had no salvage value. In the same year he incurred professional expenses in connection with several clients in the amount of $342. No part of this expense was repaid and the entire amount was a loss in the taxable year.
Some time prior to 1921, the petitioner bought shares of stock of the Yellow Cab Corporation of Memphis, for which he paid $350. *504 In the taxable year he sold this stock for $200. During 1921 he paid $80 for professional books which he kept in his home. Such books all dealt with legal matters and were a part of his professional *2568 library. The dwelling owned by the petitioner, and in which he resided, sustained depreciation in 1921 in the amount of $325.
OPINION.
LANDSDON: The following described amounts are found by the Board to be professional expenses, trade losses evidenced by closed and completed transactions, bad debts ascertained to be worthless, and expenses in connection with business of clients definitely shown to be uncollectible within the taxable years, as designated: 1920
Traveling expenses $102.39
Expenditures at Memphis Country Club for entertainment of clients 96.80
1921
Bad debts $435.00
Loss in automobile trading 270.00
Professional expenses not collected 342.95
Farm losses 110.00
The contributions to the Phi Delta Theta fraternity, and the depreciation of the petitioner's dwelling, were personal expenses. The cost of books, the brokerage paid for securing a loan to be used in the construction of the petitioner's dwelling were either personal expenses or capital investments and are, therefore, not legal deductions from gross income. The proof in support of the claim for deduction of other items disallowed is not sufficient to enable us to make *2569 the findings of fact upon which to base a decision for the petitioner.
Judgment will be entered on 15 days' notice, under Rule 50.
Considered by GREEN and ARUNDELL.