Court Opinion

ID: 4497471
Source: CourtListenerOpinion
Date Created: 2020-01-23 18:15:26.764316+00
Date Added: 2024-06-11T15:04:05.060786
License: Public Domain

*675OPINION.
SteRnhagen:
The petitioner is entitled to this deduction on the ground that the one-third share of its profits was at the end of the year definitely committed to Weinbach, subject only to be defeated by a subsequent net loss, over which the petitioner had no control. There is no doubt that the petitioner received the full amount of profits and that these profits accrued to it in its own right. See Traylor Engineering & Mfg. Co. v. Lederer, 271 Fed. 399; certiorari denied, 257 U. S. 638. Coincidently, however, as part of its ordinary business it incurred the obligation to pay Weinbach an amount measured by a percentage of those profits. Weinbach had no right *676to have part of the profits impounded or intrusted. He merely had a cause of action in contract the damages of which would be measured by the percentage of profit. This is an accrual deduction.
It is said that the liability is not determined until the end of the contract period, which, so far as payment is concerned,- is true. Weinbach could not have sued to recover before the termination of the period. But this is too rigid a test. As a reasonably prudent person the petitioner was committed not to impair this percentage. It was only by a business loss which the petitioner would not reasonably be supposed to bring about voluntarily that the amount could be impaired, and since such a subsequent loss would not be taxable the petitioner here would be in no better tax position in any event.

Judgment for petitioner.