Thomas Henry, Inc. v. Commissioner

OPINION.

GReen:

Section 214(a) (7) of the Revenue Act of 1921, reads as follows :

Sec. 214. (a) That in computing net income there shall be allowed as deductions :

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(7) Debts ascertained to be worthless and charged off within the taxable year (or, in the discretion of the Commissioner, a reasonable addition to a reserve for bad debts) ; * * *

Under this section a taxpayer may do one of two things, to wit, deduct the debts ascertained to be worthless and charged off within the taxable year, or, in the discretion of the Commissioner, he may deduct a reasonable addition to a reserve for bad debts.

The petitioner has deducted both the reserve set up for bad debts and also the bad debts. Obviously it is not entitled to deduct both the amount of debts ascertained to be worthless and charged off in the. taxable year and an addition to a reserve for bad debts. The respondent has allowed the amount claimed for bad debts ascertained to be worthless and properly disallowed the addition to the reserve set up for bad debts. See Trans-Atlantic Clock & Watch Co., 3 B. T. A. 1064, and Arthur J. Marks, 9 B. T. A. 1047.

Judgment will be entered for the respondent.