Court Opinion

ID: 4623066
Source: CourtListenerOpinion
Date Created: 2020-11-21 02:52:09.240768+00
Date Added: 2024-06-11T07:56:17.560730
License: Public Domain

C. FLORIAN ZITTEL, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Zittel v. CommissionerDocket No. 14111.United States Board of Tax Appeals12 B.T.A. 675; 1928 BTA LEXIS 3496; June 15, 1928, Promulgated *3496  Respondent sustained in computing tax on the salary actually received by petitioner in 1921.  C. Florian Zittel pro se.  J. L. Deveney, Esq., for the respondent.  ARUNDELL*675  The petitioner seeks a redetermination of a deficiency in income tax for the year 1921 in the amount of $7,637, claiming that an item of salary which the respondent included in 1921 income was income in 1920.  FINDINGS OF FACT.  In March, 1919, petitioner entered the employ of William Randolph Hearst under a three year contract as theatrical advertising solicitor of the New York Evening Journal and as manager of the International Film Co., at an agreed salary of $52,000 per year.  Hearst directed that the petitioner's salary be paid by the Star Publishing Co. of New York.  Under the contract petitioner was to maintain his own office and pay his own expenses.  The Star Publishing Co. in 1919 paid the petitioner the salary agreed upon, and $19,000 in the first half of 1920.  About the first of July, 1920, the company advised him that it was short of funds and requested that it be allowed to withhold further payments for awhile.  To this the petitioner assented, as he*3497  felt that his contract with Hearst was good and was satisfied in his own mind that he would get the money.  During the remainder of the year he continued to perform his duties, maintained his office, and paid his expenses out of his pocket, receiving nothing from the Star Publishing Co.  In December, 1920, the petitioner began to need money and called upon the Star Publishing Co. for payment, but was unable to effect collection.  His attorneys also attempted by interviews and correspondent to collect the amount owing to petitioner, but without success.  The Star Company did not deny that the money was owing to the petitioner but contended that the contract was with Hearst and that petitioner should collect from him.  Hearst being out of town at that time, petitioner was unable to see him until the middle of February, 1921, when upon presentation of the matter he ordered the Star Publishing Co. to pay the petitioner the amount due him for 1920 and 1921 up to that time.  The company complied with Hearst's order.  Prior to filing his income-tax return for 1920 petitioner inquired of attorneys in New York City and also of some one in the Bureau *676  of Internal Revenue in Washington*3498  as to how he should report his 1920 income.  From both sources he received advice that the entire contract salary of $52,000 should be reported as 1920 income.  He filed his return for 1920 on March 15, 1921, and reported thereon as salary received the amount of $52,000.  To this return he attached a typewritten schedule of the deductions claimed and at the top of the schedule there was this statement: This report is based on accrual basis, yearly contract of $52,000 of which only $19,000 has been collected.  In his return for the year 1921 petitioner reported as his gross income salary of $52,000.  Petitioner did not accrue any expenses during the years involved.  His books have been destroyed by fire.  In his return for 1919 he indicated that it was filed on a receipts basis and in his 1920 return that it was filed on an accrual basis.  As a result of a revenue agent's investigation and report, the respondent in auditing petitioner's returns for 1920 and 1921 determined petitioner's income in each year in the amounts actually received and computed the taxes accordingly.  These computations resulted in an overassessment of $1,994.70 for 1920 and a deficiency of $7,637 for*3499  1921.  OPINION.  ARUNDELL: The petitioner seeks a redetermination of taxes for the years 1920 and 1921, but as the respondent has found an over-assessment for 1920 which does not arise out of the rejection of an abatement claim, we have no jurisdiction over the respondent's finding for that year.  We may, however, consider the facts with reference to that year for the purpose of deciding whether the deficiency in the 1921 taxes was correctly determined.  The respondent has found that the petitioner was on a cash receipts and disbursements basis and has taxed his salary in the years in which it was actually received.  According to the petitioner's testimony he kept books and records of some kind during the years 1920 and 1921, but we do not know on what basis they were kept.  All that we have on this phase of the case is that on his return for 1919 he wrote in reply to the question on the face of it that it showed "income received" and on his 1920 return he indicated that he kept books on an accrual basis.  Certain it is that his accounts in 1920 were not strictly on an accrual basis for he took into consideration only expenses paid.  On this state of the record we can not find*3500  that the respondent erred in holding that the petitioner was on a receipts and disbursements basis.  *677  Taxpayers on a receipts and disbursements basis are required to report only income actually received no matter how binding any contracts they may have to receive more.  So for the year 1920 it was necessary for this taxpayer to include in the salary reported for taxation only the amount he actually received.  For the year 1921 he was required by law to report all that he actually received and the fact that a part of it was for services rendered in 1920 can not make it taxable income for the earlier year.  See . We have repeatedly held that even where salary is credited on the books of the employer it is not income to the taxpayer until actually received in the absence of evidence of constructive receipt. , and cases there cited.  There can be no valid argument of constructive receipt made here in view of the showing of petitioner's vain efforts to collect in the year 1920.  Judgment will be entered for the respondent.