Case Name: James R. Buchanan, Petitioner, v. Commissioner of Internal Revenue, Respondent; Mrs. James R. Buchanan, Petitioner, v. Commissioner of Internal Revenue, Respondent
Court: United States Board of Tax Appeals
Jurisdiction: United States
Decision Date: 1927-07-30
Citations: 7 B.T.A. 893
Docket Number: Docket Nos. 9297, 9298
Parties: James R. Buchanan, Petitioner, v. Commissioner of Internal Revenue, Respondent. Mrs. James R. Buchanan, Petitioner, v. Commissioner of Internal Revenue, Respondent.
Judges: Considered by Phillips, Milliken and Van Fossan.
Reporter: Reports of the United States Board of Tax Appeals
Volume: 7
Pages: 893–895

Head Matter:
James R. Buchanan, Petitioner, v. Commissioner of Internal Revenue, Respondent. Mrs. James R. Buchanan, Petitioner, v. Commissioner of Internal Revenue, Respondent.
Docket Nos. 9297, 9298.
Promulgated July 30, 1927.
Alan H. McLane, Esq., for the petitioners.
W. F. Wattles, Esq., for the respondent.

Opinion:
OPINION.
Marquette:
The first error alleged by the petitioners is that the respondent, in computing the net income of the Laguerre Syndicate for the year 1922, erroneously included therein the amount of $9,004.36. The respondent concedes that he erred as alleged by the petitioners and that the partnership income as determined by bim should be decreased by the amount of $9,004.36 and the petitioners' distributive share thereof adjusted accordingly.
The petitioners also allege that the respondent, in computing the net income of the Laguerre Syndicate for the year 1922, erred in disallowing as a deduction from gross income the amount of $4,746.22 claimed as a loss on an oil well drilled in that year for one Mon-tagnet. The evidence relative to this point discloses that in 1922 the Laguerre Syndicate contracted to drill an oil well for Mon-tagnet for which he was to pay $11,000 and also $9,000 from the proceeds of the first oil produced. Montagnet became financially embarrassed and was unable to meet his obligations and the Laguerre Syndicate, by a written agreement, took over Montagnet's interest in the oil lease. The written agreement was not introduced in evidence and we are not informed as to what its terms were. The evidence does show that Montagnet's interest in the lease was taken over by the Laguerre Syndicate as a result of " a kind of creditor's meeting," and that Montagnet owed the syndicate at that time more than $25,000, of which amount obviously not more than $11,000 could have been owing on account of the drilling of the oil well in question. Edward Laguerre, a member of the Laguerre Syndicate, testified that he did not know how the estimate of $7,500 as the value of Mon-tagnet's interest in the oil lease when it was taken over by the syndicate was arrived at. The testimony as to this issue is vague and indefinite. Interpreting it in its aspect most favorable to the petitioners it simply shows that the syndicate drilled a well for one Mon-tagnet at a cost of $12,246.22; that in the same year it took over Montagnet's interest in the lease, estimated the value thereof to be $7,500 and claimed a loss of $4,746.22 on the transaction. The respondent has determined that no loss was sustained. The evidence produced on behalf of the petitioners does not convince us that the syndicate sustained the loss claimed and we do not feel warranted in disturbing the determination of the respondent.
The petitioners also allege that they were granted exemptions of $1,000 each whereas the proper exemption was $1,250 each. Whether they should receive the one exemption or the other depends upon the amount of their taxable income. If, after adjusting their income in conformity with what we have hereinbefore said, it is found to be more than $5,000, they are each entitled to a personal exemption of $1,000, but if their net taxable income is found to be less than $5,000, they are each entitled to a personal exemption of $1,250. (Section 216(c) of the Revenue Act of 1921.)
No evidence was offered in support of the other allegations of error.
Order of redet&rmination will be entered on 15 days' notice, v/nd&r Rule 50.
Considered by Phillips, Milliken and Van Fossan.