Bluthenthal v. Commissioner

*175OPINION.

Trussell:

The one question involved in this appeal is: What was this taxpayer’s salary income from the Roxbury Distributing Co. for the year 1920 which he must report in his individual income tax return and upon which he must pay a tax under the Revenue Act of 1918?

The corporation of which this taxpayer was president, on April 24, 1918, spread upon its record a resolution authorizing a payment to this taxpayer of a salary of $1,000 per month, the same to be effective from and after January 1, 1918, and there is nothing in the record to show that this corporate action had at any time prior to the close of the year 1920 been rescinded or modified. It does appear, however, that the corporation did not, during the years 1918, 1919, and 1920, follow the directions of this resolution; that during the year 1918 only $10,000 was charged on the company’s books as salary for this taxpayer; that during the year 1919 no charge was entered on the company’s books as salary for this taxpayer; and that during the year 1920 only $10,000 was accrued and entered on the company’s books as salary for this taxpayer. The books of said company were on or about the close of each of said calendar years properly closed and the accounts for those years settled with the salary entries as last above stated. The corporation’s books remained in that condition without modification or change until on or about February 12,1924, when the supplemental entries hereinabove quoted were made.

This taxpayer’s individual income tax return for 1920 was due to be made, and, so far as we are advised, was made, on or before March 15, 1921, and appears to have been made in exact accord with the books of the corporation of which he was president, as the same stood at that time, and, also, this taxpayer in reporting $10,000 as his salary income for the year 1920 reported the full amount which he actually received, and having done so his income tax return, so far as it related to salary income from the corporation of which he was the president, was complete and disclosed his true gross income from that source.

This taxpayer is reporting his income upon the basis of cash receipts and disbursements, the corporation upon the accrual basis. Such being the case, it is the simple fact that this taxpayer did not receive the income in 1920 sought to be attributed to him by the Commissioner.