Colvert v. Commissioner

6 B.T.A. 623, 1927 BTA LEXIS 3462

• Court: United States Board of Tax Appeals
• Decided: March 26, 1927
• Docket: Docket No. 9170.
• Status: Published

Opinion

OPINION.

Marquette:

The first question presented herein is whether the petitioner, in computing his net income for the year 1920, is entitled to deduct as a bad debt the amount of $3,200 represented by the note given to him by George Colvert in the year 1913. The respondent contends that the note became barred by the Texas statute of limitations in the year 1917, and that it was, therefore, worthless in that year. The petitioner, however, insists that, even if the note ■was barred by the Texas statute, George Colvert moved to Oklahoma in the year 1919 and that the payment of interest in Oklahoma revived the debt.

It is not necessary for us, in deciding whether the amount of the note in question is a proper deduction from the petitioner’s gross income for the year 1920, to go into the question of whether the note was barred by the laws of Texas or revived under the laws of Oklahoma. The availability of the statute of limitations as a defense to an action on a note is not in itself proof that the note is in fact worthless. Appeal of Leo Stein, 4 B. T. A. 1016. The evidence here shows that George Colvert returned to Oklahoma in the year 1919 and that he recognized his debt to the petitioner, at least as a moral obligation, by working for the petitioner and having the value of his services credited on the note. At that time he held vendor’s lien notes in the amount of $6,000 from which the petitioner might reasonably expect he would in the future receive sufficient money to discharge his obligation. However, the vendor’s lien notes became worthless in the year 1920, the security behind them having been destroyed, and it became apparent to the petitioner at that time that in all probability the note in question would never be paid. The petitioner thereupon determined that the note was worthless and claimed the amount thereof as a deduction in 1920. We are of the opinion that the deduction should be allowed.

In regard to the deduction in the amount of $7,000 claimed by the petitioner in the year 1921, we are not satisfied from the evidence that the note executed and delivered by the petitioner to John D. Colvert was accepted by John D. Colvert as payment for the services he had rendered. Under the law as laid down by the Supreme Court of Oklahoma, a promissory note given for a prior indebtedness is not in itself proof of the payment^of indebtedness. Whether or not a note is given and accepted in satisfaction of a preexisting debt is a question of fact to be determined from the evidence. Ohio Cultivator Co. v. Duncan, 67 Okla., 58; 168 Pac. 1002.

The evidence herein does not show to our satisfaction that the note in question was given to or accepted by John D. Colvert in satisfaction of the debt due him from the petitioner.

It is also urged by the petitioner that if we do not hold that the note of John D. Colvert was given and accepted in full satisfaction of the amount due from the petitioner to John D. Colvert, that we should nevertheless find that $4,000 was actually paid in the year 1921, which should be allowed as a deduction in that year. The petitioner testified that $4,000 was paid by him in December, 1921, or January, 1922, but he did not definitely fix either date. The respondent has determined that no part of the money was paid in the year 1921, and in the absence of satisfactory evidence to show that payment was made in that year we will not disturb the respondent’s determination.

Judgnient will be entered on 15 days’ notice, under Rule 50.

Trussell dissents.