Sakowitz v. Commissioner

LOUIS SAKOWITZ, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Sakowitz v. Commissioner

Docket No. 10807.

United States Board of Tax Appeals

7 B.T.A. 267; 1927 BTA LEXIS 3216;

June 10, 1927, Promulgated

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Lawrence A. Baker, Esq., John V. Coffield, Esq., and Leroy Sanders, Esq., for the petitioner.

D. D. Shepard, Esq., for the respondent.

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SMITH

SMITH: This proceeding is for the redetermination of a deficiency in income tax for the year 1920 in the amount of $580.67. It is alleged that the Commissioner committed error in including in the petitioner's income for 1920 the amount of $6,000 representing a bonus credited to him in 1920 upon the books of a corporation of which he was an officer and stockholder but not actually received by him during the taxable year.

FINDINGS OF FACT.

The petitioner is an individual residing at Indianapolis, Ind. During the year 1920 he was secretary and treasurer of the General Engineering Co., a corporation formed during the year 1919 and engaged during the year 1920 in dismantling an Army camp near Fort Worth, Tex. He was employed by the company upon the basis of a yearly salary of $6,000 and there was a further agreement that he would receive a yearly bonus in proportion to the extent to which his services contributed to the success of the business. The corporation kept its books upon the basis of a fiscal year ending June 30. At the close of the fiscal year ended June 30, 1920, it credited upon its books to the personal account of the petitioner a bonus in the amount of $6,000. No part of the bonus was paid to the petitioner during the calendar year 1920, nor was the petitioner privileged to draw upon the company for any part thereof. The petitioner held 2 shares of the 1,000 shares of stock of the company and his two brothers-in-law, Isaac Marks and H. Benjamin Marks, each held 498 shares. The remaining 2 shares were not issued.

The petitioner kept no personal books of account. He made up his income-tax return for the year 1920 upon the cash receipts and disbursements basis and did not report any income in respect of the bonus of $6,000 standing to his credit upon the books of the General Engineering Co. The Commissioner in computing the petitioner's tax liability for the year 1920 has included the $6,000 in taxable income. This action was in error.

Judgment will be entered on 15 days' notice, under Rule 50.