Huning Mercantile Co. v. Commissioner

1 B.T.A. 130, 1924 BTA LEXIS 238

• Court: United States Board of Tax Appeals
• Decided: December 2, 1924
• Docket: Docket No. 15.
• Status: Published

Opinion

OPINION.

Korner :

The method employed by taxpayer in keeping its records was not in accord with approved methods of accounting and in the particulars set out in the findings of fact appears to have been rather artless. However, from the evidence submitted on behalf both of the Government and of the taxpayer, it is apparent that the Logan note was uncollectible in the fiscal year 1920 and at all times thereafter, and that the taxpayer was justified in ascertaining it to be worthless and in charging it off in that year as a bad debt.

We are of opinion that the subsequent carrying of this item on the books for memorandum purposes, while not good accounting, does not justify the restoration of this debt, which was undoubtedly worthless, to income. Books of account are intended to reflect the true condition of the taxpayer’s affairs and to assist the Government in ascertaining true net income for taxation. When they do not do so they should bind neither the Government nor the taxpayer. In determining net income for purposes of taxation the actual facts and circumstances should control. We are of opinion that the debt in question was actually worthless at the close of the fiscal year 1920, when it was ascertained so to be by the taxpayer and by it charged off as such.