The opinion
APPEAL OF EQUINOX CO.
Equinox Co. v. Commissioner
Docket No. 3021.
United States Board of Tax Appeals
2 B.T.A. 466 ; 1925 BTA LEXIS 2419 ;
September 7, 1925 , Decided Submitted June 1, 1925 .
*2419 Bad debt disallowed as not having been ascertained to be worthless and charged off within the taxable year.
Wilbur H. Camp, C.P.A., for the taxpayer.
Wills D. Nance, Esq., for the Commissioner.
MORRIS
*467 Before IVINS, MARQUETTE, and MORRIS.
This appeal is from the determination of deficiencies in income taxes of $5,022.07, $3,058.13, and $268.55 for the fiscal years ended October 31, 1919, 1920, and 1921, respectively. The only error assigned by the taxpayer is the disallowance by the Commissioner of a deduction in computing its net income for the fiscal years 1919 and 1920 of $15,100 as a bad debt. From the pleadings and oral and documentary evidence presented at the hearing the Board makes the following
FINDINGS OF FACT.
The taxpayer is a Vermont corporation, with its principal office at Manchester. Since its incorporation, December 12, 1902, it has been engaged in the hotel business. For several years the Equinox Spring Co. had been indebted to it in varying amounts, which debt as of October 31, 1919, was $15,100. During the year 1919 and prior to October 31, $5,244.49 had been paid on the account. During that same period *2420 the only charges to the Equinox Spring Co. account were for items of freight aggregating $287.79. The assets and liabilities of the Equinox Spring Co., as shown by its books on October 31, 1919, were - ASSETS.
Cash $46.05
Accounts receivable (including doubtful accounts) 779.17
Inventory - cases, corks, bottles, and labels 1,688.00
Machinery and fixtures 2,625.00
5,138.22
Deficit 11,133.24
16,271.46
LIABILITIES.
Notes and accounts payable 15,233.67
Reserve - Bad debts 37.79
Capital stock 1,000.00
16,271.46
On December 31, 1919, the item of $15,100 was charged to profit and loss on the taxpayer's books.
DECISION.
The determination of the Commissioner is approved.
*468 OPINION.
MORRIS: The book value of the assets of the Equinox Spring co. as of October 31, 1919, was $5,138.22, represented by cash, accounts receivable, inventories, machinery, and fixtures. The principal liability was the debt of $15,100 to the taxpayer. There is no evidence in the record that these assets were not worth their book value or that the taxpayer would not be able to recover at least a part of the debt. During the 10 months *2421 immediately preceding the close of its fiscal year 1919 it recovered from the Equinox Spring Co. $5,244.49. We are therefore of the opinion that the debt was not ascertained to be worthless nor was it charged off in the fiscal year 1919. The lack of evidence as to the value of the assets of the debtor company during the taxpayer's succeeding fiscal year forces us to conclude that the debt, although charged off, is not deductible for that year.
ARUNDELL not participating.