Messenger Publishing Co. v. Commissioner

APPEAL OF MESSENGER PUBLISHING CO.

Messenger Publishing Co. v. Commissioner

Docket No. 1569.

United States Board of Tax Appeals

2 B.T.A. 30; 1925 BTA LEXIS 2583;

June 10, 1925, Decided Submitted March 31, 1925.

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Albert W. Torbet, C.P.A., for the taxpayer.

B. H. Saunders, Esq., for the Commissioner.

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Before STERNHAGEN, TRAMMELL, and PHILLIPS.

This is an appeal from a determination of a deficiency in income and profits taxes for the fiscal years ended January 31, 1920, and January 31, 1921, in the amount of $1,404.87. The appeal was submitted upon the pleadings, deficiency letter, internal-revenue agent's report, and findings of fact made by the Income Tax Unit.

FINDINGS OF FACT.

In 1920 the taxpayer leased a store for five years, which it renovated preparatory to moving into it. On the books of the taxpayer the expenses incurred were separated into moving expense and improvements. At the close of the year the amount charged to improvements, in the sum of $1,163.31, was transferred to expense account and claimed as a deduction upon the income-tax return. No other evidence of the character of these expenditures was furnished The Commissioner disallowed this deduction on the ground that these items should be prorated over the life of the lease.

During the fiscal year ended January 31, 1921, the taxpayer credited the account of a customer (a corporation) with the sum of $1,000. It appears that the officers of this customer assisted the founder in establishing the business and that it gave the taxpayer considerable work and created a large field for the use of religious calendars which the taxpayer printed. Due to these considerations the taxpayer customarily grants to this customer special allowances on its bills when due. The $1,000 credit does not represent the usual discount or allowance given to this customer on purchases and was disallowed by the Commissioner on the theory that it was a gift or contribution. There was no further proof concerning the volume of, or profit from, the business produced by the customer or of the reasons for this additional credit.

DECISION.

The deficiency is allowed in part and disallowed in part. It should be redetermined by allowing for the fiscal year 1921 the deduction of $1,000 for discount as above set forth in the findings of fact. The disallowance of the deduction of $1,163.31, above set forth, is approved. Final determination will be settled on consent or on ten days' notice, in accordance with Rule 50.