Axelrod v. Commissioner , 18 B.T.A. 927 ( 1930 )

HERMAN AXELROD, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Axelrod v. Commissioner

Docket No. 22505.

United States Board of Tax Appeals

18 B.T.A. 927; 1930 BTA LEXIS 2566;

January 27, 1930, Promulgated

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W. W. Furnell, C.P.A., for the petitioner.

L. A. Luce, Esq., for the respondent.

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LANSDON

The respondent has refused to abate an assessment of income tax for the year 1920 in the amount of $1,261.19. The petitioner has duly appealed therefrom and for his causes of action alleges (1) that he is entitled to deduct from his gross income the amount of a certain promissory note which he endorsed and paid in the taxable year for a partnership of which he was a member; and (2) that in the taxable year he sustained a loss in the amount of $5,935.22, which he should be allowed to deduct from his gross income for such year.

FINDINGS OF FACT.

The petitioner is an individual who resides at Bartlesville, Okla. In the taxable year he was a member of a partnership operating under the name of Overfield-Fisher Petroleum Co., and made capital contributions thereto in the amount of $5,935.22.

The partnership was engaged in leasing and developing oil and gas properties. Prior to and in the taxable year it obtained leases on certain tracts of undeveloped oil and gas lands in Kansas. In 1920 a well drilled on such land developed no oil or gas and was a worthless dry hole. Thereafter the oil and gas leases owned by the partnership were without value and the company had no other assets. At December 31, 1920, the petitioner's interest in the partnership was without value and his capital contribution thereto in the amount of $5,935.22 was a total loss.

In the year 1920 in order to secure funds for operations the petitioner endorsed a note of the partnership for $7,200. He later paid this note in full and has never been repaid the amount thereof.

OPINION.

LANSDON: The evidence is conclusive that the petitioner's capital contribution to the partnership was a total loss in 1920. The amount thereof, $5,935.22, should be deducted from petitioner's gross income in 1920 for income-tax purposes.

The petitioner endorsed and paid a note for the partnership. The endorsement was within the taxable year. The date of the payment is not disclosed by the record. The note was the obligation of the partnership, each member of which was liable for the full amount thereof. The record fails to disclose any attempt by the bank to collect from the partnership, or by the petitioner after payment to collect from his associates. In this situation it is our opinion that the action of the Commissioner in disallowing the amount of the note as a deduction in 1920 must be approved.

Decision will be entered under Rule 50.