*1054 Before GRAUPNER, LANSDON, LITTLETON, and SMITH.
The taxpayer appeals from deficiencies in income and profits taxes for the years 1919 and 1920 in the amounts of $216.59 and $4,555.30, respectively. The only question in issue is the right of the taxpayer to deduct from gross income in the years 1919 and 1920 amounts paid to its officers as salaries for preceding years. From the oral and documentary evidence introduced and Board makes the following
*1055 The taxpayer is engaged, in the business of importing creosote oil, which it sells to the railroads of the United States for their ties. In 1917, when the United States went into the war, business stopped entirely. On July 2, 1917, a resolution was passed by the board of directors to the effect that salaries should not thereafter be paid in regular monthly installments. The resolution referred to reads as follows:
Minutes of a meeting of the Board of Directors of Atlantic & Gulf Transportation Co. held at the office of the Company #171 Madison Avenue, Borough of Manhattan, City of New York, on July*2688 2nd 1917.
Present: All Directors.
The President states that owing to war conditions the business of this Company has entirely stopped. At the request of the Directors the President and Secretary-Treasurer agree for the reason just stated that their salaries from July 1st, 1917 for the balance of the year i.e. until December 31st, 1917 shall not be paid to them in regular monthly installments as heretofore, but only at some future time when in the judgment of the Directors such payments can be made. The amount of money due for the salaries to the officers, is to be placed temporarily into a separate account, from which later at the direction of the Directors and with the consent of the stockholders the payment of back salaries to the officers of the Company is to be made.
A corresponding resolution was adopted on January 2, 1918, relative to payment of salaries to officers for the calendar year 1918.
In 1919 the business started up again and the taxpayer began to make a profit. In addition to the regular salaries paid for the year 1919, the taxpayer paid to the officers a part of the salaries which had been withheld from them from July 1, 1917, to December 31, 1918. *2689 The balance of the deferred salaries was paid to the officers during the year 1920.
The taxpayer's books of account were kept on an accrual basis.
The Commissioner has disallowed the deduction from gross income in income-tax returns for the years 1919 and 1920 of amounts paid to the officers as deferred salaries for the period July 1, 1917, to December 31, 1918, and has also excluded from claimed invested capital an amount representing the deferred salary account.
DECISION.
The determination of the Commissioner is approved. See .