Liggett v. Commissioner , 13 B.T.A. 794 ( 1928 )

THOMAS LIGGETT, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Liggett v. Commissioner

Docket No. 13550.

United States Board of Tax Appeals

13 B.T.A. 794; 1928 BTA LEXIS 3187;

October 4, 1928, Promulgated

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Evidence held insufficient to determine that respondent erred in disallowing a deduction claimed as a bad debt.

W. D. McBryar, Esq., for the petitioner.

A. H. Murray, Esq., for the respondent.

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MORRIS

This proceeding is for the redetermination of a deficiency of $2,720.16, income tax for 1921, which results from the disallowance of a deduction of $12,428.42, claimed as a bad debt ascertained to be worthless and charged off during the taxable year.

FINDINGS OF FACT.

On or about January 1, 1914, the petitioner began providing for and taking care of his mother-in-law, Elizabeth Steele Say, who at that time resided in a house belonging to him. Petitioner's son had been living with her for a while but moved away leaving her there. The petitioner had an understanding with Frank M. Say and Willard Say, that they would see that he was reimbursed for his advances to their mother. This understanding was chiefly with Willard, who petitioner considered was a very bright fellow and a good money maker.

From time to time thereafter, and as needed, petitioner advanced various sums of money to Elizabeth S. Say until her death on November 25, 1920. In 1916 petitioner's wife died, and in 1918 or 1919 Willard Say committed suicide, leaving an insolvent estate. After Willard's death the petitioner was the sole support of Elizabeth S. Say, who had become bedridden.

Upon the death of his mother-in-law in November 1920, petitioner was appointed administrator of her estate, the assets of which were insufficient to meet the funeral and administration expenses. His claim for $15,554.87 for advancements and disbursements he had made for her benefit was the only one filed against her estate. His final report and account as administrator was approved by the Orphans' Court of Allegheny County, Pennsylvania, on December 28, 1921. This report showed an additional amount of $95.47 due petitioner because of sums advanced to meet administration expenses.

At the time petitioner first began providing for his mother-in-law, she was possessed of modest means and had sufficient money to care for herself, a fact which petitioner discovered later. However, Willard Say obtained control of her money and lost all of it through speculation and investments. Petitioner never took a note or other evidence of indebtedness from his mother-in-law, nor did he at any time demand payment from her for any of the sums so advanced. Until the death of Willard Say, petitioner looked to him for reimbursement.

On his return for 1921 petitioner claimed a deduction of $12,428.42 as a bad debt ascertained to be worthless and charged off in the taxable year. The deduction consisted of $12,332.95 of the $15,554.87, the difference between these two amounts being interest and taxes which had previously been deducted, and $95.47, representing expenses of administration hereinbefore set forth. The respondent disallowed the $12,332.95 deduction upon the ground that it was in the nature of a gift to Elizabeth S. Say, and disallowed the $95.47 deduction upon the ground that it was a personal expense and not a deduction authorized by law.

OPINION.

MORRIS: The question presented is the deductibility of $12,428.42 claimed by petitioner as a bad debt. The respondent contends that the larger portion of the amount represents a gift and that the remainder thereof is a personal expenditure, and, therefore, is not an allowable deduction.

The testimony of the petitioner shows that he received no note on notes or other evidence of indebtedness from his mother-in-law, or either of her two sons, and he testified that he looked to Willard Say for reimbursement until the latter's death. Willard Say, as the testimony discloses, committed suicide in the year 1918 or 1919, leaving an insolvent estate. Therefore, it is evident, that if he was obligated to reimburse the petitioner for the amounts advanced to his mother, the amount of the indebtedness which had accrued at the date of his death became absolutely worthless at that time. With respect to the amounts advanced subsequently to the death of Willard, we can find nothing in the evidence tending to show that a relationship of debtor-creditor ever existed between the petitioner and Elizabeth S. Say, either before the death of her son or thereafter. From the very nature of things we can see no tangible distinction between the amounts advanced by the petitioner for the support of his mother-in-law during her lifetime and the amount of $95.47 which he voluntarily advanced for the closing of her estate.

We must, therefore, because of failure on the part of the petitioner to adduce sufficient evidence to overcome the prima facie correctness of the respondent's determination, sustain his findings.

Judgment will be entered for the respondent.