The Pacific commercial advertiser. [volume] (Honolulu, Hawaiian Islands) 1885-1921, 1904-03-24
SIX BIG TAX APPEAL
CASES ARE DECIDED
Question of Deductions for Losses in Business
Is Discussed at Length by Chief
Justice Frear.

retained on the books to be written off
the following year because the appel
lants did not wish to write off all in one
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
in the usual course of banking business,
would seem to be deductible, provided
they occurred during the year in ques-
ton, July I, 1902 June 80, 1903, even
! under narrower statutes than ours. See
! Lawless VS.. Sullivan and Reds Brew
cry Co. vs.. Male, supra. In our opinion,
they are deductible 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
ment of interest until 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 loss before
| that year began, although the amount
| that might be realized on it was I'M
! certain.
WHERE BREWERS WIN.
The principal item in the case of c.
! Brewer & Co., Ltd, is similar to the
! items already considered. 1t was note
| of the Kona Sugar Co.. Endorsed by M.
| w McChesney & Sons, given in the
! course of business for railway material
! sold 1t was dated February S, 1901,
/ when NJ w hcChesney & Sons credit
was good. 1t was for $4,Soo.4S, the
! balance unpaid, now in question, being
| $3,S4388 The Kona Sugar Co. failed
and its property was sold at a receivers
! sale in the early part of 1908 for not
! sufficient to pay its secured creditors.
NJ W. McChesney & 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 mig hit pull
through In our opinion, the decision
of the Tax Appeal Court allowing the
deduction should be affirmed.
w w 1OSOI.
Another item in the C. Brewer & Co.
case was $3.50 paid by the company
as agent for the American Sugar Co.
and correspondents OF A. B. Mcclellan
of Boston for stamps on a 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
of 1rnrtblacc W1Iia
as already 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 contended, it would
have cost as much as, perhaps more
than, the amount of the debt to collect
1t under the circumstances that would
probably be sufficient to justify not at
tempting to collect as a 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 |
Z. O. HALL & SON.
In the case of z. o. Hall & Son, Ltd, |
the item is $40, $4,000, 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- |
livered 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 |
41,a Il, IL.
and was kept on the books for that |
reason. Its deduction was properly al |
lowed.
w. & H. INVESTMENT co.
In the case of the Western & Hawai- |
ian Investment Co., Ltd, the item is |
$663.5o, the deficiency on note after
foreclosing a mortgage. The note was |
given several years before but was con- |
sidered collectible in July, 1902. The
maker of the note had other property |
but apparently it was mortgaged to such |
an extent that it was not worth while |
to attempt to collect the balance of the |
note. he deduction was, in Our opin-
ion, properly allowed
CASTLE & COOKE.
In the case of Castle & Cooke, Ltd.
the item is S26,233.Io. This company |
iAeid elhN oiiNSd Ndoil, dllQ SOlu IlldCllfleTV,
supplies, etc, to the Hawaiian Automo
bile Co, Ltd. beginning in 1900. A
note secured by mortgage was taken for
the total amount, SS372I.So 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 wear
there remained a balance of S26.233.Io.
The deduction OF this was properly al
lowed. Whether the deduction of $40
600 made the year before in the income
tax return was proper, we need not saw.
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