Roffwarg v. Commissioner

2 B.T.A. 332, 1925 BTA LEXIS 2463

• Court: United States Board of Tax Appeals
• Decided: July 11, 1925
• Docket: Docket Nos. 1379, 1380.
• Status: Published

Opinion

OPINION.

Ivins:

The evidence submitted at the hearing was merely explanatory of how certain certified statements, attached to the petitions, were compiled.

To justify those compilations we are, in «effect, asked to accept as true the mere statements in the tax returns as to notes and accounts receivable and payable, the inventories, and other material items, with no opportunity to verify the same from books of original entry.

The cash book is insufficient for any audit purposes. It is impossible to determine from it whether purported expense items were payments to or for the accounts of the individual partners, or were proper business expenses. Withdrawals of capital by the partners in 1920 were made in the.amount of $49,557.46. Similar transactions may well have occurred in 1919. There is no means of determining whether note payments were for partnership accounts as distinguished from transactions of the individual partners. The repeated entry of items in the cash book to “ Weiser & Eoffwarg ” accounts and to the names of the individual partners,' without clarification by a ledger or testimony, makes impossible any adequate check-up on the cash book. The same is true of entries to alleged names of creditors. They may have been individual matters or they may have related to the uptown retail store.

Various irregularities in the books make it impossible for us to place reliance on the cash book alone as to 1919 income. The revenue agent, in auditing 1920, added $10,806.77 to income by reason of credits to the private accounts of the two partners. The Board finds by an independent examination of the books that this addition should have been $10,868.13 on account of Roffwarg and $8,120.64 on account of Weiser, a total of $18,988.77, instead of $10,806.77. Each partner in 1920 received $1,110.90 in Liberty Bonds; life insurance premiums were paid out of partnership funds in the amounts of $576.20 for Roffwarg and $352 for Weiser. Their personal Federal taxes were similarly paid in the amounts of $1,030.05 and $1,046.04, respectively. These, with other unexplained items, make the above totals. In January, 1921, each received $2,000, and on March 16,1921, Roffwarg received an additional $3,915.13. How far such amounts were received in liquidation of the partnership affairs we can not ascertain from the records before us.

In the absence of adequate accounting records or a trustworthy detailed audit properly placed in evidence, it is impossible properly to determine the net income of the taxpayers.

The taxpayers have failed to satisfy us that their taxable income for 1919 was otherwise than as determined by the Commissioner.