Linn v. Commissioner , 4 B.T.A. 76 ( 1926 )

APPEAL OF GUS LINN.

Linn v. Commissioner

Docket No. 1935.

United States Board of Tax Appeals

4 B.T.A. 76; 1926 BTA LEXIS 2375;

April 23, 1926, Decided Submitted February 2, 1926.

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Josephus C. Trimble, Esq., for the taxpayer.

B. G. Simpich, Esq., for the Commissioner.

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Before SMITH, JAMES, LITTLETON, and TRUSSELL.

This appeal is from the determination of a deficiency in income tax for the year 1918 in the amount of $2,291. In his petition the taxpayer assigns as error (1) that the Commissioner has erroneously computed his income from a farming venture, it being contended that only a portion of the profits from this enterprise belonged to the taxpayer and that the balance belonged to his son; (2) that the Commissioner has not allowed the taxpayer certain deductions on account of bad debts which he contends became worthless during the year 1918; (3) that the taxpayer erroneously computed the profit realized upon the sale of shares of bank stock by reason of the fact that the cost price used in the determination was incorrect. The last assignment of error has been abandoned by the taxpayer.

FINDINGS OF FACT.

During the year 1918 the taxpayer was a resident of Kimball, Nebr.; was the owner of a hardware store and of stock in a bank at Kimball; and carried on the business of farming. The farm which he operated was leased from his son, Vernon Linn, and on it he raised a crop of wheat. Under the lease agreement, he had to bear all the expense of putting in the seed, harvesting, threshing, and hauling the wheat to the market, and to pay as rental for said land one-half of the wheat crop raised. On this farm the taxpayer raised and marketed during 1918 approximately 4,800 bushels of wheat, which were sold for $8,685.55. The expenses paid by the taxpayer for planting, harvesting, and hauling the wheat to market were $2,546.01. He paid his son for rental the sum of $4,342.77. The net profits realized from the farm rented were $1,796.76.

During the taxable year the taxpayer also owned a farm which he leased to John Shafer under a contract by which the taxpayer was to receive as rental one-half of the proceeds from the sale of hay and one-fourth from the sale of potatoes raised on the farm. The total receipts from the hay were $750.70, and the total receipts from potatoes were $1,556.78. The net profits realized by the taxpayer from this farm in 1918 were $764.54 ($375.35 from the hay and $389.19 from the potatoes).

The Commissioner determined the income of the taxpayer from farming operations during the year 1918 to have been $7,196.23. The actual profit realized from such operations was $2,561.30.

During the taxable year the taxpayer ascertained that the makers of the notes set forth in the table following had left the country, and charged them off the books of account of the hardware store as worthless. To the date of the hearing nothing had been collected on these notes.

Notes of -
H. J. Erickson, due Feb. 1, 1917	$52.90
Robert Cole, due Feb. 5, 1913	148.10
H. J. Erickson, due Dec. 7, 1914	28.50
L. Christensen, due Jan. 1, 1915	14.50
Ted Ware, due Aug. 1, 1915	25.00
Ted Ware, due Oct. 1, 1915	$80.00
Roy Rohrer, due Feb. 1, 1916	30.50
G. M. Clark, due May 11, 1916	9.55
G. H. Caffee, due July 1, 1917	73.95
J. M. Cox, due May 24, 1918	218.50
Total	681.50

The following is a statement of debts ascertained to be worthless and charged off during the year, the deduction of which was disallowed by the Commissioner:

Account.	Date account opened.	Date last entry.	Amount.
Jim Christime	Apr. 23, 1917	Apr. 23, 1917	$3.00
Disputed account.
Guy Disney	Sept. 1, 1917	Sept. 9, 1918	2.35
A. E. Everhart	Apr. 29, 1916	Apr. 29, 1916	37.75
R. Green	Sept. 1, 1917	Apr. 3, 1918	25.25
Left country.
Hutchinson cattle
job (error of
charge)			1.25
Ray Ledingham	July 17, 1917	Dec. 24, 1918	6.00
Left country.
Al Mangan	July 1, 1917	July 1, 1917	105.85
Disputed account.
H. E. Owen	Jan. 10, 1917	Jan. 10, 1917	27.60
Pat Doyle	Jan. 1, 1916	Nov. 1, 1918	19.50
Both left country.
Note Jacob Abel
(no payment made
and this note was
determined loss
on Dec. 31, 1918)	Mar. 28, 1918	Oct. 1, 1918	1,277.50
Notes listed in
the preceding
table			681.50
Total			2,187.55

The Commissioner allowed the deduction from gross income of 1918 of $808.91 for debts ascertained to be worthless. The amount allowable is $2,187.55 plus $808.91, or $2,996.46.

Order of redetermination will be entered on 15 days' notice, under Rule 50.