Hanchett Bond Co. v. Commissioner

7 B.T.A. 725, 1927 BTA LEXIS 3107

• Court: United States Board of Tax Appeals
• Decided: July 26, 1927
• Docket: Docket No. 8703.
• Status: Published

Opinion

OPINION.

GReen:

Section 234 (a) (1) of the Revenue Act of 1918 provides that, in computing the net income of the corporation, there shall be allowed as deductions all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for services rendered. The return filed stated that the salary in question was paid as “ compensation made for administrative services rendered over period of past five years.” We were not informed whether the petitioner maintained its books of account upon the cash receipts and disbursement basis or upon the accrual basis. The additional salaries were not paid during the prior years. If the books of account were maintained upon the accrual basis for the prior years, a liability must have been incurred in those years to pay the additional salary in question, in order that the salary could be claimed and allowed as a deduction in computing net income for those years. It may be that such additional salaries paid in 1919 constitute a reasonable compensation for personal services actually rendered in that year, but we have no evidence before us concerning the salary paid, service performed, or the value or character of business done during the year 1919, and we aré, accordingly without the necessary facts to determine the issue for that year.

Judg-ment will be entered for the respondent.

Considered by Steenhagen and Aeundell.