Harris v. Commissioner , 19 B.T.A. 895 ( 1930 )

OPINION.

Smith:

Section 214(a) of the Revenue Act of 1924 provides that an individual in computing net income shall be allowed, among others, the following deductions:

(7) Debts ascertained to be worthless and charged off within the taxable year * * *; and when satisfied that a debt is recoverable only in part, the Commissioner may allow such debt to be charged off in part.

The deduction of the alleged bad debt in the amount of $5,300 has been disallowed by the respondent upon the ground that the petitioner, almost the only stockholder of the corporation, to save the corporation from bankruptcy, canceled a portion of the corporation’s indebtedness to him and that the transaction was in the nature of a capital contribution by the petitioner.

We are of the opinion that the transaction by which the petitioner advanced money to the corporation was in good faith. The results of operations in 1924 proved to be disastrous. There can be no question as to the advancement of the moneys by the petitioner nor any question as to the fact that the corporation was not at the close of 1924 in a position to pay more than a small portion of its indebtedness. It had but few assets of value. Upon the record we are of the opinion that the $5,300 claimed as a deduction constituted a bad debt ascertained to be worthless and charged off within the year.

Judgment will l>e entered for the petitioner.