*3791 Loss on sale of business disallowed as a deduction under section 202(a) of the Revenue Act of 1921 because of petitioner's failure to show basis for ascertaining gain or loss.
*497 This is a proceeding for the redetermination of a deficiency in income taxes for the calendar year 1921 in the amount of $1,124.54.
The error alleged is the failure of the respondent to allow as a deduction from income an alleged loss of $17,000 sustained upon the sale of the petitioner's business, stock, fixtures, and accounts receivable.
FINDINGS OF FACT.
The petitioner in this proceeding is an individual who started in the men's and women's furnishings business at 540 Hamilton Street, Allentown, Pa., on September 5, 1919, and continued in business at such address until April 15, 1921. His books were kept and his tax returns made upon a cash receipts and disbursements basis.
On April 14, 1921, the petitioner entered into an agreement whereby he agreed to transfer all fixtures, stock, leases and accounts receivable to Harry Getz and Abe Efron for the*3792 sum of $28,500, payable $5,000 cash, $8,500 on or before April 19, 1921, and the balance, $15,000, in monthly installments. Efron gave a mortgage to secure payment of the $15,000 balance.
*498 Prior to this undertaking the petitioner, on March 30, 1921, took an inventory of the stock, fixtures and accounts receivable. The summary of the inventory is set forth below:
| Merchandise | $16,370.75 |
| Fixtures | 2,067.00 |
| Accounts receivable | 26,994.25 |
The merchandise was entered in the inventory at actual cost, the accounts receivable were entered in the actual amount due, but there is no evidence as to the basis of the value assigned to the fixtures.
The books of the petitioner show that the sale of the business was made on April 15, 1921, and that the agreement and bill of sale above referred to was dated April 19, 1921. The records show that from April 1, to April 15, 1921, the petitioner purchased additional merchandise in the amount of $2,024.33, sold goods for cash to the amount of $339.67, sold goods on credit to the amount of $1,694.97, and payments were made to the petitioner on accounts in the amount of $1,309.18.
OPINION.
SIEFKIN: This proceeding*3793 involves the question as to whether the respondent erred in failing to allow, as a deduction from income of the petitioner in 1921, an alleged loss of $17,000, claimed to have been sustained by petitioner upon the sale of its stock, fixtures and accounts receivable in 1921.
Section 202(a) of the Revenue Act of 1921 provides:
That the basis for ascertaining the gain derived or loss sustained from a sale or other disposition of property, real, personal, or mixed, acquired after February 28, 1913, shall be the cost of such property; except that -
(1) In the case of such property, which should be included in the inventory, the basis shall be the last inventory value thereof; * * *
The testimony of the petitioner indicates that the petitioner made use of inventories in reporting income and that an inventory was taken at January 1, 1921, but such inventory was not submitted in evidence. The only remaining basis then for ascertaining gain derived or loss sustained is the cost of the fixtures, accounts receivable and merchandise. An inventory taken on March 30, 1921, was introduced in evidence which showed the following:
| Merchandise | $16,370.75 |
| Fixtures | 2,067.00 |
| Accounts receivable | 26,994.25 |
*3794 There is no evidence to indicate that the figure representing fixtures is the cost thereof nor is it shown how such figure was arrived at.
The petitioner operated upon the cash receipts and disbursements basis, and the accounts receivable represent sales of merchandise *499 the amount of which has not been received in cash, and, therefore, has not been reported as income. The cost of merchandise represented by the accounts receivable is not shown.
The evidence discloses that the value assigned to merchandise on hand on March 30, 1921, represents the actual cost thereof. However, the business was sold on April 15, 1921, and in the interim the petitioner purchased merchandise and also sold part of that which was on hand. No evidence is submitted as to the cost of the merchandise sold during this period. It is, therefore, impossible to determine the cost of the merchandise on hand on April 15, 1921.
In view of all the evidence we must hold that the petitioner has failed to sustain his burden of provind the basis for ascertaining the gain derived or loss sustained from the sale of his business.
Judgment will be entered for the respondent.