Stone v. Commissioner

GEORGE L. STONE, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Stone v. Commissioner

Docket No. 10756.

United States Board of Tax Appeals

9 B.T.A. 20; 1927 BTA LEXIS 2685;

November 8, 1927, Promulgated

---

Amounts of commissions held not distributive shares of partnership or actually or constructively received.

Oscar E. Waer, Esq., for the petitioner.

Alva C. Baird, Esq., for the respondent.

---

SIEFKIN

This is a proceeding for the redetermination of a deficiency for 1920 in the amount of $589.10, resulting from the addition by respondent to petitioner's income in that year, a sum of $6,200.07 as commissions credited but not received from a partnership of which he was a member.

FINDINGS OF FACT.

During the year 1920 petitioner was a member of the Grand Rapids Table Co., a partnership, and sold goods for it on commission during that year. During that year petitioner was credited with $6,200.07 as commissions earned during the year. No part of such amount of commissions was drawn by petitioner in the year 1920 or at any time thereafter. On July 4, 1922, the plant of the partnership burned and the firm went out of business after paying the creditors but without paying petitioner either the earned commissions credited to him or his investment in the firm. When the partnership started business in 1919 it was orally agreed between the partners that the members should only draw such moneys as the condition of the business would warrant, and this agreement was in effect in 1920. During all of the year 1920 the Grand Rapids Table Co. owed so much money that withdrawal of any part of the $6,200.07 commissions was not warranted and the petitioner had no right to draw the entire sum or any part of it under such circumstances. The year 1920 in the furniture industry was one of severe deflation and the Grand Rapids Table Co. lost money so that, at the end of the year 1920, outside of these commissions, it had liabilities that equaled its assets. The partnership had no net income for the year 1920.

Petitioner kept his books and reported his income on a cash receipts and disbursements basis.

OPINION.

SIEFKIN: As to the amount of $6,200.07 earned commissions in 1920, the evidence is clear and uncontradicted that the petitioner had no right to the amounts credited to him on the books of the partnership except as the business warranted and it is equally clear that the business did not warrant. See section 218(a), Revenue Act of 1918.

The year 1921, for which a deficiency is asserted by the respondent, is not placed in issue. The respondent's determination as to that year is approved.

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

Considered by TRAMMELL, MORRIS, and MURDOCK.