The Hawaiian gazette. [volume] (Honolulu [Oahu, Hawaii]) 1865-1918, 1904-03-25

year. The testimony is that the whole
OF the debt is bad-apparently because Of
the failure of the kona Sugar Co., GER
tain bonds and stock in which were the
principal securities to the note and OF
NJ. W. McChesney & Sons, the agent of
the sugar company and makers of the
note. Such losses as these, not of capital
permanently invested, but of loans made
i'll the usual course of banking business,
would seem to be deductble, provided
they occurred during the year in qucs-
ton, July 1. 1902 June 80, 1908, even
under narrower statutes than ours. See
Lawcss VS.. Sullivan and Reds Brew
cry Co. VS.. Male, supra. In our opinion,
they are deductblc under our Statute.
They must, we think be taken to have
become losses during the year in ques-
ton. There was no default in the pay
mcnt of interest until a month after that
year began. The testimony seems to
indicate that the balance of the note was
considered a total loss during that year
and that must be taken to have been the
finding of the Tax Appeal Court. There
is no evidence that it was Il loss before
that year began, although the amount
that might be realized on it was UNI
certain
WHERE BREWERS WIN.
The principal item i'll the case of c.
Brewer & Co, Ltd, is similar to the
items already considered. 1t was note
OF the Kona Sugar Co.. Endorsed by Nj.
w. McChesney < Sons, given in the
course of business for railway material
sold 1t was dated February S, 1901,
when NJ w. McChesney & Sons credit
was good 1t was for $3,Soo4S the
balance unpaid now in question, being
S3,S43SS. The kona Sugar Co. failed
and its property was sold at a receivers
sale in the early part of 1903 for not
sufficient to pay its secured creditors.
NJ. w. NIcChesney & Sons also failed
in consequence. There was some stock,
as collateral to the note, in the Hawai-
ian Navigation Co.. Ltd, which failed
before the Kona Sugar Co. The debt
was then written off. The debt shows
that it was regarded as absolutely worth
less then, but that up to the time or not
long before there was some chance that
the embarrassed companies might pull
through. In our opinion, the decision
OF the Tax Appeal Court allowing the
deduction should be affirmed
WHERE BREWERS LOSE.
Another item in the c. Brewer & Co.
case was $43.4o paid by the company
as agent for the American Sugar Co.
and correspondents of A. B. Mcclellan
of Boston for stamps on new issue
of stock issued to him by the American
Sugar Co. in 1901. Shortly after the
American Sugar Co. failed and Mr.. Nc
Clellan died, and in April, 1908, the debt
was written off as worthless. While,
as alreadv stated, some discretion must
be allowed business men in determining
when debt becomes bad and should be
written off, it seems that in this in
stance no attempt was made to collect
the amount and it was apparently as
clearly worthless before July I, 1902,
as after that. If, as commended, 1t would
have cost as much as, perhaps more
than, the amount of the debt to collect
it under the circumstances that would
probably be sufficient to justify not at
tempting to collect as matter OF good
business sense and within the income
tax law, but that would not justify
holding it indefinitely and writing it off
at any time arbitrarily. 1t may be that
there was good reason for holding IT in
this instance, but that does not appear,
+. o. HALL & SON.
In the case OF l.. ". nan q oOIl LII,
the item is 100000, representing stock
in the kona Sugar Co., which was writ
ten off as bad when that company failed.
/ he stock was taken several years be-
fore in payment of goods sold and de-
livcred in the regular course of business.
1t was considered as of some value, and
with some prospect of the company'S
surviving its financial difficulties during
,,f
and was kent on the books for that
reason. Its deduction was properly al
lowed
w. & II. INVESTMENT co.
In the case of the Western & Hawai-
ian Investment Co., Ltd, the item is
5000. so, the deficiency on note after
foreclosing mortgage. The note was
given several years before but was con-
sdered collectible in July, 1902. The
maker of the note had other property
but apparently il was mortgaged to such
an extent that it was not worth while
to attempt to collect the balance of the
note. The deduction was, in our opin-
ion, properly allowed
CASTLE & COOKE.
In the case of Castle < Cooke, Ltd,
the item is $26.233.Io, This company
had advanced cash, and sold machinery,
supplies, etc. to the Hawaiian Automo-
bile Co., Ltd beginning in 1900 A
note secured by mortgage was taken for
the total amount, $83,72ISo During
the year. July I, IooI-June 80, 1902,
$4,000 OF this was written off as bad.
The note and mortgage were consider
ed good for the balance in July, 1902,
but after foreclosure later in that year
there remained balance of $2o,a33Io.
The deduction OF this was properly al
lowed, Whether the deduction OF $780,
600 made the year before in the income
tax return was proper. we need not say.
MIN nnNVN rpnnnHN