Hardy v. Commissioner

*983OPINION.

Korner, Chairman:

The evidence here is illustrative of the Biblical adage that the poor we have always with us. If these tenants were not poor they would not be “ cropper ” tenants in the cotton belt. Generally, they are poor and almost universally they are judgment proof. On the other hand, another set of such tenants would be just as poor. If a cotton grower is to have tenants, it is from such that he must choose them. There appears to be little choice among them. If a crop is good and brings a price fair or better, they may be able to discharge to their landlord the debts incurred for advances. If their share of the crop is sufficient for that purpose, such debts are usually liquidated. The landlord generally sees' to that. But if the crop is a failure or brings a low price or worse, the landlord is out of pocket and the tenant is not much the worse off, because a year to him is just a living. Whether that living comes out of the crop he raises or out of the landlord’s pocket matters little or nothing to him. If he has done the best he could under the situation, he can be fairly sure of staying on — at the landlord’s risk, of course. If he has not proved reasonably efficient in the judgment of the landlord, he merely lives the next year at the expense of another landlord until another crop tells him the extent of the risk he has been to that landlord during that year. In the end it is all one to the tenant. The landlords, under this system, *984are fairly philosophical, although it is said they are at times exacting in respect of financial arrangements with, and collections from, their cropper tenants. This system of farming is not without its hazards to the landlord, as the bank reports in the cotton belt in a bad year will show. One who knows something of the cropper tenant system in the cotton belt does not have to tax his credulity to believe that the landlord finds means to credit his outstanding accounts to the capacity of the tenant. He commonly sees to it that there is rendered to Caesar the due that is Caesar’s. If aught is left over, and there sometimes may be, that may be rendered to whomsoever it may be rendered. But the landlord is rarely a poor collector. The Commissioner defends on the ground that the writing off of the indebtedness of these tenants constituted a gift or forgiveness of indebtedness. Our judgment tells us that this is not so. We do not incline to the opinion that eleemosynary considerations entered into the petitioner’s operation of his plantation, or that it was an impulse of generosity which prompted his charging off these debts.

To one who has read the record, it is apparent that the financial picture here can not be drawn with the fine point of a Bembrandt or a Dürer, or painted with the nicety of a Botticelli. A broad brush must be used, for the picture is a broad one of the lives of the lowly.

It is clear to us that the petitioner knew the financial conditions of his tenants. No one knew better. In the light of that knowledge, he ascertained these accounts to be worthless and in the taxable year he charged them off. The statute gave him a right to do so and to take a deduction from his tax return accordingly. That he continued to employ these tenants, under the conditions shown here, can not affect the result. Midland Coal Co., 1 B. T. A. 311.

As to the overseer or manager of the plantation, Gayle, we are not so convinced. Gayle had a substantial account with the petitioner, who also held Gayle’s note for $300. He continued on thereafter as manager of the petitioner’s plantation. The only amount petitioner charged off at the end of the taxable year was Gayle’s note of $300. The open account in a substantial amount was not charged off. We are not convinced that the petitioner correctly ascertained the note "to be worthless, while at the same time holding the open account to be good.

In our opinion the petitioner is entitled to his deduction for bad debts to the extent of $11,194.89.

Judgment witt be entered on 15 days’ notice, under Bule 50.