The opinion
FIRST NATIONAL BANK, PARKERS LANDING, PA., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
First Nat'l Bank v. Commissioner
Docket No. 14571.
United States Board of Tax Appeals
12 B.T.A. 1387 ; 1928 BTA LEXIS 3349 ;
July 17, 1928 , Promulgated
*3349 1. Evidence of a national bank that an asset account representing Russian bonds was in 1921 reduced by amounts "charged off" by order of a national bank examiner held insufficient to established a deductible loss or bad debt.
2. No deduction in respect of reduced value of Russian Imperial bonds may be taken unless the loss provision of the statute is fulfilled. First National Bank of St. Paul, 10 B.T.A. 32 , followed.
William G. Heiner, Esq., for the petitioner.
H. L. Jones, Esq., for the respondent.
STERNHAGEN
*1387 This proceeding results from the determination of a deficiency in income and profits taxes for the year 1921 amounting to $742.67.
Petitioner contends: (1) Respondent erred in increasing income by an amount of $785 attributed to additional profits on the sale of securities. Respondent admitted this error. (2) Respondent erred in the disallowance of a deduction of an alleged loss amounting to $1,850 on Russian Government bonds.
The facts are found as stipulated.
FINDINGS OF FACT.
Petitioner is a corporation with its principal office at Parkers Landing, Pa.
On or about January 13, 1916, the *3350 petitioner purchased $5,000 par Imperial Russian Government, of an issue of $50,000,000, 6 1/2 per cent three-year credit, bonds due June 18, 1919, and paid therefor par *1388 or $5,000 plus accrued interest of $2.71. On June 25, 1920, $1,750 of the Russian bond account was charged off by the taxpayer in compliance with the order of George H. Smith, National Bank Examiner. On December 30, 1920, $1,000 was charged off on the Russian bond account by the taxpayer in compliance with the order of A. B. Camp, National Bank Examiner. On June 30, 1921, $1,250 on the Russian bond account was charged off by the taxpayer in compliance with an order of National Bank Examiner Edward C. Hennecke. On September 1, 1921, $600 was charged off by the taxpayer on the Russian bond account in compliance with an order of National Bank Examiner E. F. Shively. There remains a balance of $400 in the Russian bond account still carried on taxpayer's books in that amount.
OPINION.
STERNHAGEN: The facts before us indicate nothing as to actual worthlessness of the bonds or that a loss was in fact realized. The single reason for "charging them off" was an order of a national bank examiner. This *3351 does not prove either a loss sustained, under section 234(a)(4) or a debt ascertained to be worthless under section 234(a)(5), Revenue Act of 1921, ; ; . Nor are the facts sufficient to show the extent to which the debts, if they were to be treated as such under the revenue act, were recoverable only in part, so as to allow partial charge-off.
The Board has recently held in respect of certain Russian bonds that, although debts, no deduction could be taken unless the loss provision of the statute were fulfilled. . Here we have only an inference of reduced market value of property still in possession and accounted for as an asset, and this inference arising not from evidence as to the bonds themselves but from an order of a national bank examiner for the purpose presumably of conservative accounting. The respondent is sustained.
Judgment will be entered under Rule 50.