Israel v. Commissioner

The taxpayer appeals from the determination of a deficiency of of $1,005.69 for the years 1921, 1922, and 1923, which arises from the Commissioner’s disallowance of alleged depreciation of furniture, fixtures and equipment, operating expenses of a passenger automobile, and traveling expenses. The taxpayer was the sole witness, and the testimony, after direct and cross examination, was in many respects so indefinite, unsatisfactory, and varying that it is not sufficient to support a finding of fact based thereon. The taxpayer asserts the loss of his accounts and records to support any of the statements made and his own recollection was uncertain.

FINDINGS OP PACT.

Under date of August 30, 1921, the taxpayer purchased from the Portland Hotel Co. and Thomas L. Ely, the furniture, furnishings, carpets, bedding, electric fans, restaurant furniture and equipment of a hotel and restaurant known as the Portland Hotel, in St. Louis, together with the good will of the business and the right to use the name Portland Plotel. He also purchased certain leaseholds upon the property. This purchase was covered by a bill of sale which contained a complete inventory of the hotel furniture and equipment. The price paid by the taxpayer for all of this was $25,000. There was no allocation made of this purchase price as to the different items purchased. On June 23, 1922, by bill of sale of that date, he sold the restaurant with its furniture and fixtures for $6,000. This property had been included in that purchased as aforesaid.

The taxpayer' deducted $6,000 as a loss resulting from the sale of the restaurant, which loss was computed by allocating $12,000 of the original purchase price to the restaurant. The Commissioner allowed the deduction of this loss. The Commissioner allocated $3,000 of the original purchase price to good will and the use of the hotel name, and $10,000 to furniture, .fixtures, and equipment. This $10,000 was adopted by the Commissioner as the basis for depreciation at the rate of 10 per cent, after' the taxpayer had on his return deducted depreciation at 10 per cent based upon an alleged cost of $20,000 for the furniture, fixtures, and equipment. The taxpayer spent something after the acquisition of the property upon improvements. The records of these expenditures are lost. The taxpayer owned a Packard automobile and a Maxwell automobile. He occasionally drove out-of-town people around to see St. Louis.

DECISION.

The determination of the Commissioner is approved.