Toccoa Furniture Co. v. Commissioner , 12 B.T.A. 804 ( 1928 )

OI’INION.

Phillips :

The Commissioner computed the depreciated cost of petitioner’s plant and machinery on the assumption that it was all acquired in 1907. The evidence shows that a substantial portion was acquired in later years. It also shows that certain purchases were made which were charged off the books as expense. Consequently the cost has been understated and the depreciation overstated. A recom-putation of the depreciated cost gives the result set out in the findings. The petitioner is entitled to deduct a loss of $23,699.60 instead of $18,443.24 allowed by the respondent.

The same errors have resulted in understating invested capital by $5,256.36.

The evidence does not indicate that the petitioner ascertained the indebtedness of Piedmont Furniture Co. to be worthless in 1920. The most that can be said is that it was known that in all probability a part could not be collected. But the Revenue Act of 1918 does not permit deduction of a doubtful account or of a part of a debt; the debt must be ascertained to be worthless. Moreover, the indebtedness was not charged off, as the Act requires. A reserve equal to 75 percent was set up, but the deduction of such reserves was not permitted until a later Act, Steele Cotton Mill Co., 1 B. T. A. 299; Carl Muller, 4 B. T. A. 169.

Decision will be entered wider Rude 50.