Case Name: Carl G. Stifel, Trustee, Estate of Otto F. Stifel, Petitioner, v. Commissioner of Internal Revenue, Respondent
Court: United States Board of Tax Appeals
Jurisdiction: United States
Decision Date: 1927-08-09
Citations: 7 B.T.A. 1060
Docket Number: Docket No. 6470
Parties: Carl G. Stifel, Trustee, Estate of Otto F. Stifel, Petitioner, v. Commissioner of Internal Revenue, Respondent.
Judges: Considered by Smith.
Reporter: Reports of the United States Board of Tax Appeals
Volume: 7
Pages: 1060–1062

Head Matter:
Carl G. Stifel, Trustee, Estate of Otto F. Stifel, Petitioner, v. Commissioner of Internal Revenue, Respondent.
Docket No. 6470.
Promulgated August 9, 1927.
W. G. H. Kessler, Esq., for the petitioner.
Henry Ra/venel, Esq., for the respondent.

Opinion:
OPINION.
Littleton :
The decedent maintained personal books of account. Although he was an officer and a stockholder of the One Wheel Truck Co. and was familiar with its financial condition prior to his death, there is no evidence that he considered the notes which he held to be worthless. He did not charge them off on his books of account. Counsel for the estate contends " that the fact that the notes of the One Wheel Truck Co. were not charged off on the taxpayer's books is wholly immaterial as bearing upon the issue since said fact constitutes merely a bookkeeping entry or may be ascribed to faulty bookkeeping, and does not in itself affect or alter the worthlessness of the debts. Furthermore, it is a well known and established fact that mere bookkeeping entries can not create income or affect the income, but the facts underlying such entries must determine the tax liability of a taxpayer."
Section 214- (a) (7) of the Revenue Act of 1918 provides that in computing net income there shall be allowed as deductions debts ascertained to be worthless and charged off within the taxable year. Under the provisions of the statute, it is necessary to an allowance of a deduction for bad debts that such debts shall have been ascertained to be worthless and charged off. In Ed. G. Lasater, 1 B. T. A. 956, the Board held that " Under the provisions of the Revenue Act of 1918 a so-called bad debt is an allowable deduction from gross income only when ascertained to be worthless and charged off within the taxable period. The charging off of bad debts should, in the case of a taxpayer keeping regular books of account, be evidenced by such book entries as will effectually eliminate the amount of the bad debt from the book assets of the taxpayer." See also Winthrop Ames, 1 B. T. A. 63; Greenville Textile Supply Co., 1 B. T. A. 152; Donalsonville Oil Mill, 1 B. T. A. 167; Murchison National Bank, 1 B. T. A. 617; Jessie B. Wadsworth, Executrix, 1 B. T. A. 1043; Dover Iron Co., 1 B. T. A. 1123; Mason Machine Works Co., 3 B. T. A. 745.
Judgment will be entered for the respondent.
Considered by Smith.