Court Opinion

ID: 4618641
Source: CourtListenerOpinion
Date Created: 2020-11-21 02:39:02.959987+00
Date Added: 2024-06-11T07:55:30.490539
License: Public Domain

MAUDE ENELLA BRICKELL, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Brickell v. CommissionerDocket No. 14321.United States Board of Tax Appeals17 B.T.A. 711; 1929 BTA LEXIS 2249; September 30, 1929, Promulgated *2249  1.  A net loss sustained by petitioner in 1922 arose from the operation of a business regularly carried on within the meaning of section 204 of the Revenue Act of 1921 and is a proper deduction from income for 1923.  2.  Interest added to income by Commissioner held not to have been received by petitioner in the taxable year; since the petitioner employed the cash receipts and disbursements method of accounting she is not taxable on such interest.  3.  The fair market value of property acquired by devise determined.  4.  The evidence shows that certain debts were ascertained to be worthless and charged off in the taxable year, held that the Commissioner erred in refusing to allow a deduction thereof.  5.  The evidence does not establish that petitioner is entitled to a deduction of the amount claimed for depreciation and expense of operating an automobile.  William S. Hammers, Esq., for the petitioner.  J. L. Backstrom, Esq., for the respondent.  LITTLETON*711  The Commissioner determined a deficiency of $2,612.03 for 1923.  Petitioner claims that the Commissioner erred (1) in declining to allow as a deduction from 1923 income*2250  a loss of $3,414.70 in 1922; (2) in increasing income in the amount of $1,498.15 as interest received; (3) in determining that certain property acquired by petitioner upon the death of her mother had a market value of $7,000 instead of $7,500; (4) in disallowing a deduction of $2,730, worthless debts; and (5) in refusing to allow a deduction of $1,595 for depreciation and expense of operating an automobile.  FINDINGS OF FACT.  Petitioner is a resident of Miami, Fla.  During 1922 she owned certain residential properties which she rented, and about six lots.  For the most part she personally looked after the upkeep and the renting of the properties.  She was not engaged as a dealer in real *712  estate, although the property owned by her was for sale if a satisfactory price could be obtained.  During 1922 petitioner received interest from mortgages in the amount of $1,446.53 and depreciation and repairs on property owned by her exceeded the amount received therefrom in the amount of $1,403.07.  In this year petitioner paid local taxes in the amount of $3,916.45 and her return for that year showed a loss of $3,872.99, about which there is no question.  She claims that this loss*2251  is a proper deduction from income for 1923.  The Commissioner disallowed it.  During 1923 petitioner received interest in the amount of $1,780.60, which she reported in her return for that year.  The Commissioner increased this amount in the sum of $1,498.15, which petitioner did not receive in the taxable year.  In 1922 petitioner acquired by devise from her mother certain unimproved real estate, the fair market value of which at the time was $7,500.  She sold this property in 1923 for $9,500, thereby realizing a profit of $2,000.  December 20, 1922, petitioner loaned one H. L. Duke $150 for which he gave his promissory note due February 18, 1923.  No portion of this loan was ever paid.  In 1923 petitioner placed the note in the hands of her bank for collection.  The bank was unable to make collection and returned the note to petitioner, at which time she placed it in the hands of a collection agency which, also, was unable to make collection.  The debtor had no property and he could not be located.  Petitioner determined the debt to be worthless and charged it off within the taxable year.  Petitioner loaned the amount of $2,580 to one A. L. Thompson who was at the time an employee*2252  of the estate of petitioner's mother.  This amount was due in 1923.  Petitioner made every effort to collect the amount, without success.  Thompson had no property.  The debt was worthless and petitioner charged it off in 1923 and deducted the amount thereof from income for that year.  Petitioner's mother died in January, 1922.  Petitioner was an executrix of the estate and devoted a considerable portion of her time to looking after the affairs of the estate, the hours devoted by her in that work being from about 9 a.m. to 5 p.m. In connection with her duties as an executrix petitioner devoted such time as was necessary in looking after her own property.  In 1923 petitioner received $50,000 for her services as executrix in that year.  In 1923 petitioner owned a Packard sedan automobile and employed a chauffeur.  She used this automobile in connection with looking after her own property and in connection with the administration of her mother's estate.  In her return for 1923 petitioner claimed a deduction of $1,175 as depreciation on this automobile and $420 as automobile expenses.  The Commissioner disallowed these deductions.  *713  OPINION.  LITTLETON: As to the first*2253  point, we are of opinion that petitioner was engaged in the operation of a business within the meaning of section 204 of the Revenue Act of 1921 and is therefore entitled to a deduction in 1923 of the net loss of $3,414.70 sustained by her in 1922.  This net loss arose from the management, upkeep and renting of certain properties which petitioner owned.  All of the property on which there were dwellings was rental property; petitioner was, to the extent necessary, regularly engaged in keeping the property rented, in making improvements, and repairs thereon, and in collecting interest on mortgages held by her.  This we think was sufficient to constitute a business, and the net loss claim is allowed.  The fact that petitioner devoted a considerable portion of her time to her duties as an executrix of her mother's estate does not change the situation.  A person may be engaged in more than one business.  Petitioner acquired a certain parcel of real estate by devise from her mother, which property had a fair market value of $7,500 at the date acquired.  She sold this property in 1923 for $9,500 and realized a profit of $2,000 instead of $2,500 as determined by the Commissioner.  We*2254  are satisfied from the evidence that the deduction of $2,730 claimed by the petitioner on her return for the taxable year as a worthless debt was a proper deduction and that the Commissioner erred in disallowing the amount.  The Commissioner disallowed the deduction claimed by petitioner for automobile expense and depreciation.  There is no testimony in the record that the amounts claimed were correct.  All that appears is that the petitioner claimed the amounts on her return.  But, if it be conceded that the depreciation and the expense are correct in amount, we are not convinced from the testimony that the entire amount was a business expense and there is no way of telling what portion, if any, should be allowed as a deduction.  Reviewed by the Board.  Judgment will be entered under Rule 50.