Kay v. Commissioner , 10 B.T.A. 534 ( 1928 )

WALLACE G. KAY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Kay v. Commissioner

Docket No. 10102.

United States Board of Tax Appeals

10 B.T.A. 534; 1928 BTA LEXIS 4082;

February 6, 1928, Promulgated

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Amounts of business expenses, losses and depreciation determined and allowed as deductions from income for calendar year 1921.

George M. Wolcott, Esq., for the petitioner.

E. C. Lake, Esq., for the respondent.

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SIEFKIN

This is a proceeding for the redetermination of a deficiency in income taxes for the calendar year 1921, in the amount of $404.69. The deficiency asserted results from the determination of the respondent that certain amounts deducted from gross income were not legally deductible expenses and losses in connection with the petitioner's trade or business under the provisions of section 214 of the Revenue Act of 1921.

FINDINGS OF FACT.

The petitioner is an individual whose business address is 118 Penobscot Building, Detroit, Mich. In 1921, he was engaged in the business of refinancing or recapitalizing corporations in Toledo, Ohio, and Owosso, Rochester, Detroit and Middleville, Mich. In such work it was necessary for the petitioner to visit these places at frequent intervals and about 95 or 98 per cent of this travel was by automobile. During the year in question the petitioner traveled between 30,000 and 35,000 miles in his automobile.

On March 27, 1921, the petitioner purchased a Paige car at a cost of $3,595. On May 24, 1921, the petitioner traded the Paige in on a Marmon car, the price of which was $6,107.08, including interest. The petitioner was allowed $2,300 on the old car. These two cars were used solely for business purposes, another car being maintained for family use, and separate accounts of expenses were kept for the business cars and pleasure car.

During 1921 expenses in the sum of $551.76 for gasoline and $1,012.24 for parts and repairs were incurred in operating the business cars. Petitioner also claimed another item of about $100 for which the bills are lost, but he does know that this amount was expended, the total expenditures totaling $1,686. Petitioner also employed a chauffeur, at a salary of $100 per month, whose sole duties were to drive the business cars, although occasionally he drove the family car on Sundays. Petitioner also purchased meals for the chauffeur and when spending the night away from home paid for the chauffeur's hotel accommodations.

During 1921, the petitioner paid $60.50 for railroad travel. Due to the great amount of travel by automobile, the minimum depreciation on the cars used was 25 per cent per year. From the middle of August to October 1, 1921, the car was being painted and petitioner rented a car, but no claim for gasoline or rental charge is made.

The petitioner collected no insurance, nor was in any other way compensated for the loss sustained in the sale of his Paige car.

OPINION.

SIEFKIN: Section 214(a) of the Revenue Act of 1921 provides as follows:

That in computing net income there shall be allowed as deductions:

(1) All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered; traveling expenses * * *;

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(4) Losses sustained during the taxable year and not compensated for by insurance or otherwise, if incurred in trade or business;

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(8) A reasonable allowance for the exhaustion, wear and tear of property used in the trade or business, including a reasonable allowance for obsolescence. * * *

We must hold, in view of the evidence, that the petitioner is entitled to deductions for travel expenses, $60.50; for chaffeur's salary, $1,200; for gasoline, repairs, etc., $1,686; depreciation on Paige car from January 1 to May 24, 1921, at the rate of 25 per cent per annum, $336.09; depreciation on Marmon car from May 24 to December 31, 1921, at the rate of 25 per cent per annum, $890.61; and for loss on the sale of the Paige car on May 24, 1921, $239.37.

Judgment will be entered for the petitioner.