Case Name: August Merckens, Petitioner, v. Commissioner of Internal Revenue, Respondent
Court: United States Board of Tax Appeals
Jurisdiction: United States
Decision Date: 1927-05-20
Citations: 7 B.T.A. 32
Docket Number: Docket No. 10108
Parties: August Merckens, Petitioner, v. Commissioner of Internal Revenue, Respondent.
Judges: 
Reporter: Reports of the United States Board of Tax Appeals
Volume: 7
Pages: 32–35

Head Matter:
August Merckens, Petitioner, v. Commissioner of Internal Revenue, Respondent.
Docket No. 10108.
Promulgated May 20, 1927.
Albert L. Clothier, Esq., for the petitioner.
J. E. Marshall, Esq., for the respondent.

Opinion:
OPINION.
Littleton :
The Board is unable to agree with petitioner's contention that only one-fourth of the $75,000 received on January 5, 1920, in payment for his consent to the cancellation of his contract of employment and his resignation as general manager of the company mentioned was income for 1920. Section 213 of the Revenue Act of 1918 provides that the term "gross income" includes among other items "gains or profits and income derived from any source whatever" and that "the amount of all such items shall be included in gross income for the taxable year in which received by the taxpayer, unless, under methods of accounting permitted under subdivision (b) of section 212, any such amounts are to be properly accounted for as of a different period." It is not claimed that the $75,000 was not income but it is contended on behalf of petitioner that because he kept his accounts and made his return upon an accrual basis only approximately one-fourth of the $75,000 constituted taxable income for the year 1920 and the remainder of the amount should be allocated to and taxed as income for the years 1921 to 1924, inclusive. The statutes specifically provide that all items of gains, profits and income shall be included in gross income for the year in which received by the taxpayer. It is immaterial so far as this issue is concerned whether the petitioner kept his books upon an accrual basis or upon the basis of receipts and disbursements. Under the terms of the cancellation agreement the $75,000 accrued and was paid to the petitioner on January 5, 1920. His relations with the corporations ceased at that date. There remained nothing to be done by any of the parties to the contract. The matter was a closed incident on January 5, and petitioner had received a gain of $75,000 which, under the statute, could not be deferred and allocated to subsequent years for tax purposes.
The Board is of the opinion that petitioner carried on his farming operations during the year 1920 as a business for profit and is, therefore, entitled to deduct from gross income a loss of $1,820 resulting from such operations.
Judgment will he entered on 15 days' notice, undér Bule 50.