*816 The respondent has determined deficiencies in income taxes for the years 1922 and 1923 in the respective amounts of $1,433.09 and $1,450.79.
*817 At the hearing the parties stipulated that there is no deficiency for 1923 and the evidence was, therefore, confined to the issues involving 1922. The petitioner claims the following deductions from income for 1922:
| (1) Depreciation, drilling tools | $13,968.75 | |
| (2) Repairs and supplies | 11,518.55 | |
| (3) Expenses charged to A. B. Reese personal account | 10,089.11 | |
| (4) Additional teaming expense | 2,356.70 | |
| (5) Commissions paid | 10,330.00 | |
| (6) Compensation insurance | 144.35 | |
| (7) Auto junked | 600.00 | |
| (8) Bad debts: | ||
| Wepfler Oil Co | $11,629.92 | |
| R. J. Barry | 3,369.86 | |
| J. J. Queenan | 1,710.89 | |
| R. A. Campbell | 2,946.00 | |
| Baucum Farms | 9,848.37 | |
| 29,496.04 | ||
| (9) Worthless leases: Baucum lease | 2,870.98 | |
| (10) Depletion: Schoolhouse lease | 5,017.22 | |
| 86,391.70 |
FINDINGS OF FACT.
The petitioner is a Louisiana corporation, organized in March, 1922, to take over the assets of*2592 a partnership engaged in the business of drilling oil and gas wells by contract. It maintains its principal office in Tulsa, Okla.
The parties have stipulated that the cost of drilling tools acquired and in use by petitioner in 1922 was $74,374.18. Included in this amount was one string of tools taken over from the partnership in exchange for stock of a par value of $15,000, which had been used on two or three wells. The remaining tools were purchased new. All of petitioner's drilling equipment was of the rotary type and had a useful life of three years.
Certain supplies and repairs in the total amount of $11,518.55, consisting of small tools, repairs to the boiler and rig and other items which may last for one day or one well were capitalized on petitioner's books in 1922.
A. B. Reese, president of petitioner, spent most of his time in the field superintending the drilling of wells. While on business in Louisiana, where petitioner had most of its work, he paid by check numerous expense items for the petitioner, the amounts of which were charged by the bookkeeper to the personal account of Reese. At the end of the taxable year, when the books were closed, the balance*2593 of Reese's account was carried as an account receivable. An *818 amount of $10,089.11, included in such balance, represented payments for team hire, labor supplies, and other expenses of the petitioner.
On its income-tax return for 1922 the petitioner omitted as an expense deduction the amount of $2,356.70 paid for team hire during the taxable year.
During 1922 petitioner paid commissions to secure drilling contracts in the total amount of $10,330, which amount was not deducted on its income-tax return for 1922.
After filing its income-tax return for 1922 the petitioner's books were audited by an adjuster representing the compensation insurance company with which it carried a policy. The adjuster found an additional premium to be due for 1922 insurance of $144.35.
In 1922 the petitioner acquired a one-fourth interest in the school house lease at a cost of $5,518.96 and in the same year several producing wells were drilled thereon. The total production of oil from such lease in 1922 was 14,710 barrels, which exhausted the oil reserve thereon, and thereafter the lease was worthless and was abandoned.
Included in the assets acquired by petitioner for stock in*2594 1922 was a Hudson automobile which was discarded and left standing in the tool shed.
During 1922 the petitioner drilled two wells for the Wepfler Oil Co., charging $1,920 for the first well and $6,916 for the second. The Wepfler Oil Co. was a name given to a venture by C. R. Wells, J. J. Queenan, and T. B. Queenan. On its income-tax return for 1922, the petitioner included in gross income the total amount of $8,836. The Wepfler lease produced a small quantity of low-gravity oil. R. R. Poe, vice president and treasurer of petitioner, made several unsuccessful attempts to collect from the individuals in 1922 and 1923.
In 1922 the petitioner drilled on the school house lease in which it owned a one-fourth interest. The remaining three-fourths interest was owned by R. J. Barry, R. A. Campbell, and J. J. Queenan. The cost of drilling the well was to be divided equally. The petitioner paid all the drilling expenses and charged one-fourth of such amount to the respective individuals. At the end of the taxable year there remained uncollected $3,369.86 from Barry, $2,946 from Campbell, and $1,710.89 from Queenan. Barry represented a New York principal, who refused to pay the*2595 amount claimed, contending that his agreement was to share the costs not in excess of $7,500, which amount he had paid. Campbell disputed the amount charged to him and refused to pay it. Queenan, who was in the banking business, was insolvent. His bank was taken over by the Government in 1923 or 1924. None of the amounts were collected.
*819 During 1922 the petitioner spent $9,848.37 in drilling on the Baucum Farms lease and contributed $2,870.98 to the purchase price of the lease. The remaining interest was owned by Queenan and Wells. No part of the amount expended was collected from them. There was some income from salvaging the well.
OPINION.
LANSDON: From the above findings of fact it follows that the petitioner is entitled to deductions of $11,518.55 for repairs and supplies erroneously capitalized; $10,089.11 for expense items carried in the personal account of Reese; $2,356.70 for additional teaming expense; $10,330 for commissions paid to secure drilling contracts; and $144.35 for additional compensation insurance premiums. Deductions for depreciation on drilling tools and for depletion on the school house lease should be allowed on the basis of our*2596 findings.
The facts presented with respect to the remaining deductions claimed fail to justify their allowance. The evidence does not establish the cost of the automobile or the year in which it was discarded. Worthlessness in the taxable year of the debts and leases is not established. Campbell and Barry disputed their liability.
Decision will be entered under Rule 50.