Brown v. Commissioner , 1 B.T.A. 446 ( 1925 )

Appeal of D. E. BROWN.

Brown v. Commissioner

Docket No. 537.

United States Board of Tax Appeals

1 B.T.A. 446; 1925 BTA LEXIS 2920;

January 30, 1925, decided Submitted January 7, 1925.

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Where a credit is claimed by reason of payment of an income tax in a foreign country, the amount thereof should be computed at the current rate of exchange.

D. E. Brown, the taxpayer, in his own behalf.

A. H. Fast, Esq. (Nelson T. Hartson, Solicitor of Internal Revenue) for the Commissioner.

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IVINS

Before IVINS, KORNER, and MARQUETTE.

From the allegations of the petition and the admissions of the Commissioner the Board makes the following

FINDINGS OF FACT.

The taxpayer paid an income tax to the Canadian Government in 1920 in the sum of $764.40, Canadian money, and he claimed a credit of $764.40 in the computation of his United States income tax for that year. The Commissioner reduced the credit to $670.13, being the value in United States money of $764.40 Canadian money at the time the Canadian tax was paid, this figure being based upon an exchange rate of $0.87667, and determined a deficiency in accordance with the disallowance of credit.

DECISION.

The determination of the Commissioner is approved.

OPINION.

IVINS: The taxpayer has been misled by the fact that the units of Canadian and American currency are both designated as dollars, and that in normal times they both represent the same amount of gold, with a result that exchange is ordinarily at par. But during the war and for some time thereafter, Canadian currency was at a discount, and when the taxpayer paid to the Canadian Government $764.40 in Canadian money, he only reduced his assets to the extent of $670.13 in American money. If the payment to the Canadian Government had been in pounds sterling, in francs, or in yen, it would be perfectly obvious that the credit permissible against American taxes would be the value in United States dollars of the number of pounds, francs, or yen paid at the time of payment, and the same is equally true with respect to any other foreign currency, even though it happened to be designated "dollar" and have a par value identical with that of the United States dollar.