*397 In this proceeding the petitioner seeks a redetermination of its income and profits taxes for the calendar year 1920, for which year the respondent has determined a deficiency in the amount of $5,307.89.
The question in the case is the right of the petitioner to a deduction for bad debts.
FINDINGS OF FACT.
The parties have stipulated facts as set forth in the following numbered paragraphs:
1. That in the year 1915 the petitioner loaned to the Bremerton Gas Co. and to the Montesano Gas Co., both public service corporations organized under the laws of the State of Washington, the aggregate amount of $70,000, evidenced by the promissory notes of the said corporations for the following respective amounts:
| Bremerton Gas Co | $45,000 |
| Montesano Gas Co | 25,000 |
| Total | 70,000 |
2. That the payment of these notes was secured by bonds written by the Illinois Surety Co. of Chicago in favor of the petitioner for the respective amounts shown.
*398 3. That in the year 1916 the Bremerton Gas Co. and the Montesano*2055 Gas Co. passed into the hands of receivers, and shortly thereafter, the Illinois Surety Co. also went into the hands of a receiver.
4. That the said Bremerton Gas Co. and the Montesano Gas Co. failed to meet their obligations on the notes given to the petitioner.
5. That the said Illinois Surety Co. refused to perform according to the terms of its bonds given to petitioner to secure payment of said notes of the above mentioned gas companies.
6. That suits were brought and judgment was rendered for the petitioner on November 29, 1916, against the Bremerton Gas Co., the Montesano Gas Co., and the Illinois Surety Co. An appeal from the judgment having been taken to the Supreme Court of the State of Washington, the case was remanded to the Superior Court, and judgment again rendered for the petitioner on April 17, 1918.
7. That no recovery was obtained on this judgment from the gas companies, no assets being found available.
8. That suit was instituted in the Illinois courts against the receiver for the surety company. The lower court sustained the contention of the receiver that bonds were void. In 1924 the Court of Appeals of the State of Illinois affirmed the*2056 judgment of the lower court, but, in December, 1925, the Supreme Court of Illinois overruled the lower courts and held the banks claims against the surety company were valid, as a result of which, in December, 1926, the petitioner recovered 20 per cent of the claims, or $14,404.22.
9. That during the year 1918 the petitioner, being under the jurisdiction of the Department of Banking of the State of Washington, on its instructions, wrote off, as a bad debt, $25,000, representing $17,000 owing to the petitioner by the Bremerton Gas Co. and $8,000 owing to the petitioner by the Montesano Gas Co. This item of $25,000 was claimed as a deduction from gross income by the petitioner in preparing its income and profits-tax return for the year 1918.
10. That in the year 1920 the officials of the Department of Banking of the State of Washington, directed the petitioner to write off on its books $30,000, represented by $18,000 owing to it by the Bremerton Gas Co. and $12,000 owing to it by the Montesano Gas Co.
The petitioner charged off on its books the amount of $30,000 as directed. In preparing its income and profits-tax return for the year 1920 the petitioner took as a deduction*2057 from gross income, on account of bad debts charged off on its books, the amount of $30,000 above referred to.
11. That in the year 1924, after having received the verdict of the Court of Appeals of the State of Illinois sustaining the receiver for the surety company in his refusal to pay the bonds given the petitioner, *399 the petitioner, on its records, then charged off to bad debts the balance appearing on its books as due from the Bremerton Gas Co. and the Montesano Gas Co. in the amount of $15,118.30.
From the oral testimony, we make the following findings:
The two gas companies became insolvent in 1916. In 1919 the officers of the petitioner learned that practically all of the assets of the surety company had been empounded and a dividend of 20 per cent paid upon the claims allowed by the receiver. Twenty per cent of the amount claimed by the petitioners was withheld by the receiver pending the outcome of the litigation. At that time there seemed to be little probability of recovering more than 20 per cent of the claim. Prior to 1920 the petitioner's officers regarded the claim as bad and lost, so far as all rules of banking were concerned, and felt that they*2058 were justified in charging it all off. The debt was determined to be worthless in 1919.
OPINION.
GREEN: The petitioner contends that the debt became worthless in 1920. Its principal witness, now chairman of the board of directors of the successor bank and president of the petitioner in 1920, testified that the debt became worthless in 1919. We know of no case in which a taxpayer has been permitted to take a deduction for a bad debt in a year subsequent to the ascertainment of worthlessness of such debt.
Judgment will be entered for the respondent.