*4154 1. The Board is without jurisdiction to hear and determine proceedings for years in which an overassessment is found by the Commissioner.
2. Deduction from income on account of business expenses allowed.
3. Deduction from income on account of alleged bad debts disallowed.
4. Evidence held not sufficient to support the petitioner's allegation that the respondent erroneously determined that certain receipts by the petitioner in the taxable years were not tax-free liquidating distributions.
*242 Respondent has determined an overassessment for the year 1918 in the amount of $6,378.16 and deficiencies for the years 1919, 1920, and 1921 in the respective amounts of $4,421.28, $17,708.04, and $7,184.80. The petitioner alleges that the respondent is in error (1) in the adjustment of inventories for each of the taxable years; (2) in disallowing as deductions from gross income in 1920 certain amounts alleged to represent bad debts and business expenses; and (3) in the inclusion in taxable income for each of the years 1920 and 1921 certain sums*4155 alleged to have been, in whole or in part, distributions of capital assets of a liquidating corporation in which the petitioner was a stockholder. The parties have agreed that the two proceedings may be consolidated for hearing and decision.
FINDINGS OF FACT.
The petitioner is a resident of the State of New York. Throughout the taxable years he was engaged in the wholesale lumber trade under the trade name of Hughson & Co., with his principal place of business at Albany.
In the audit of the petitioner's income and surtax returns the respondent made certain adjustments of inventories which increased taxable income for the years 1919, 1920, and 1921 in the respective amounts of $13,682.30, $4,949.76, and $7,345.04.
During all the taxable years the petitioner was a stockholder in Gilmour & Hughson, Ltd., a Canadian corporation. In the years 1920 and 1921 he received distributions from such corporation in the respective amounts of $38,812.50 and $38,475. Of these amounts the respondent determined that $3,258.70 received in 1920 was a *243 return of capital and not taxable, and added the remainder to taxable income for such respective years as returned by the petitioner.
*4156 In the year 1920 the petitioner, after employing all the usual methods of collection, decided that certain accounts receivable carried in his so-called "suspense account" were uncollectible and such items in the total amount of $2,675.40 were later charged off as of December 31, 1920. None of these amounts have ever been received. In the same year he incurred and took into his accounts as a liability an expense item of $900 which was paid in a subsequent year. He kept his accounts and made his income-tax returns on the accrual basis.
OPINION.
LANSDON: It appears that for the year 1918 there was an overassessment in the amount of $6,378.16 in the tax which the petitioner paid and has since made the basis for a refund claim. In these circumstances the Board has no jurisdiction over such year. ; .
The record discloses that at the hearing counsel for the respondent admitted the alleged errors as to adjustment of inventories. It follows, therefore, that the petitioner's net income for each of the years 1919, 1920, and 1921 should be reduced in the*4157 respective amounts of $13,682.30, $4,496.76, and $7,345.04, and the tax liability of the petitioner for such years recomputed accordingly.
We are not convinced by the evidence that petitioner's accounts receivable in the amount of $2,675.40 were ascertained to be worthless in 1920 and that they were properly charged off as of that year. The expense item of $900 was incurred and accrued on the books of the petitioner in 1920. The petitioner's taxable income for such year, as determined by the respondent, should be reduced by the sum of $900 and his tax liability for such year recomputed accordingly.
The major contention of the petitioner is that the effect of the determination of the respondent is that he is required to pay tax on certain receipts from a Canadian corporation which in fact were not income but were payments on account of the liquidation of such corporation and were in fact a return of capital and therefore not taxable. Upon this issue the record is not sufficient for us to make any finding of fact upon which we can base a conclusion contrary to the determination of the respondent. The only evidence of the value of the petitioner's investment in the Canadian*4158 corporation is an entry on his ledger under the caption of Gilmour & Hughson, Ltd., which states that the value of such investment at March 1, *244 1913, was $489,375. There is nothing in the record to show whether this was an appraisal, a book value, or the fair market value of stock of the Canadian corporation owned at that time by the petitioner. Even if it were conceded that the amounts in question were distributions in liquidation, without the value of the petitioner's investment as of March 1, 1913, we are unable to determine whether the amounts received in 1920 and 1921 were taxable income or nontaxable returns of capital.
At the hearing it developed that much of the evidence necessary to sustain the petitioner's contention on the third issue is contained in the books and records of theCanadian corporation, which were not offered in evidence except a certified copy of the minutes of a certain meeting of the directors of that concern, which contains no matter of evidentiary value in the determination of the question here involved. Certain papers were offered and objected to by the respondent on account of insufficient identification and such objections were sustained. *4159 At the conclusion of the hearing counsel for the petitioner moved for a continuance of 30 days to enable him to secure admissible evidence from Canada. As the proceedings had been at issue for more than 14 months, this motion was denied. Later the petitioner filed a motion with the Board, asking for a reopening of the proceeding and a rehearing. Such motion is hereby denied.
Judgment will be entered on 10 days' notice, under Rule 50.