*2617 Certain executor's fees received by the petitioner held not to be income for the year 1920.
*250 This proceeding is for the redetermination of deficiencies in income taxes asserted by the respondent in the amount of $80.24 for the year 1918; $152.38 for the year 1919, and $154.30 for the year 1920. The issues are: (1) The amount of the loss sustained by the petitioner in the year 1918 in the operation of the Deal Inn; (2) whether dividends received by the petitioner from the Lembeck & Betz Eagle Brewing Co. in 1918, 1919, and 1920, were taxable and, if so, to what extent; (3) the amount to be included in the petitioner's income for 1919 and 1920 as salary from the Lembeck & Betz Eagle Brewing Co.; (4) whether the amount of $2,917.78 received by the petitioner as executor's fees from the estate of Henry Lembeck was for 1920 or 1921.
FINDINGS OF FACT.
The petitioner is an individual residing at Jersey City, N.J. During the years 1918, 1919, and 1920, he derived income from salary and dividends and interest and rent. Among his holdings were shares*2618 of stock of the Lembeck & Betz Eagle Brewing Co., and he was also interested in that company as a beneficiary of the estate of Henry Lembeck, deceased. He kept his accounts and made his returns of income on the basis of cash receipts and disbursements.
During the year 1918 the petitioner operated the Deal Inn and Cottages. The legal title to the Deal Inn and Cottages was held *251 by the Deal Inn Co., a corporation which filed a return for 1918. In that year the Deal Inn Co. did not have sufficient funds to pay the taxes and insurance on its property and the petitioner paid the same for the company, the taxes paid amounting to $1,239 and the insurance premiums to $1,315.94. The petitioner, in his income-tax return for 1918, reported a loss of $11,913.18 on the operation of the Deal Inn and deducted that amount from gross income. The respondent reduced this loss by $2,832.83 on account of unsubstantiated items, but allowed additional depreciation in the amount of $2,000, making a net reduction of $832.83.
During each of the years 1918, 1919, and 1920, the Lembeck & Betz Eagle Brewing Co. distributed dividends to the petitioner in the amount of $1,340 and to the estate*2619 of Henry Lembeck in the amount of $1,647.50. The respondent has determined that the dividends were paid out of earnings of the Lembeck & Betz Eagle Brewing Co. accumulated since March 1, 1913; that the dividends received by the estate of Henry Lembeck were distributed to the petitioner, and that said dividends are taxable income to the petitioner.
The petitioner in his individual income-tax returns for the years 1919 and 1920 reported salary received from the Lembeck and Betz Eagle Brewing Co. in the amounts of $20,000 and $14,255, respectively.
During the year 1920 the petitioner was one of the executors of the estate Henry Lembeck, deceased. On October 1, 1920, the Orphan's Court, which had jurisdiction of the estate, allowed the petitioner executor's fees in the amount of $2,917.78. On December 30, 1920, a check was drawn on the Third National Bank of Jersey City, N.J., payable to the petitioner in the amount of $2,917.78, signed by Mary E. Harms, Gustav W. Lembeck, the petitioner herein, and Otto A. Lembeck, executors of the estate, over which signatures was printed "Estate of Henry Lembeck." The check, in order to be valid, had to be signed by the three executors. They*2620 lived in different places and the signing was not completed until some time subsequent to December 31. 1920. The check was received and endorsed on behalf of the petitioner by Arthur McAleenan, trustee for the petitioner, on January 31, 1921. The respondent, upon audit of the petitioner's return for 1920, included said executor's fees in the petitioner's income for 1920.
OPINION.
MARQUETTE: The petition herein, which contains 16 assignments of error, is indefinite and confusing and it is difficult, in fact almost impossible, to ascertain definitely of what action on the part of the respondent the petitioner complains. And the evidence is hardly *252 more enlightening than the petition. However, allowing for duplication of assignments, it appears that the issues are the four that we have set forth in the opening statement.
The petitioner in his return for 1918 deducted as a loss on the operation of the Deal Inn, the amount of $11,913.18. The respondent disallowed $2,832.83 of the loss claimed because the items were not substantiated, but allowed additional depreciation in the amount of $2,000, thus making a net reduction of $832.83. The petitioner claims that the*2621 loss as determined by the respondent should be increased by the said amount of $2,832.83, and by the further amount of $2,554.94, representing taxes and insurance premiums paid by the petitioner on property, the legal title to which was held by the Deal Inn Co. The petitioner has introduced no evidence to support his claim that the respondent erred in disallowing as a deduction the said amount of $2,832.83 and on that point we must affirm the respondent. As for the insurance premiums and taxes we are of opinion that they were obligations of the Deal Inn Co. and that when the petitioner paid them he became a creditor of the company to that extent, and that they did not represent deductible expenses to him.
Relative to the second issue, it appears that in each of the years 1918, 1919, and 1920, the Lembeck & Betz Eagle Brewing Co. paid dividends to the petitioner in the amount of $1,340, and to the estate of Henry Lembeck in the amount of $1,647.50. The respondent has determined that the dividends paid to the estate of Henry Lembeck were distributed to the petitioner in the years in which they were received by the estate, and that the entire amount of the dividends represented*2622 taxable income to the petitioner. The petitioner claims that the dividends were paid out of surplus of the Brewing Co., accumulated prior to March 1, 1913, and were therefore not taxable, and also that the dividends received by the estate of Henry Lembeck in 1920 were not distributed to him during that year. No evidence was presented to us to show that the dividends were not paid out of earnings accumulated since March 1, 1913, and we therefore affirm the respondent's determination that they are taxable. The petitioner testified that the estate of Henry Lembeck was involved in litigation and that the dividend received by it in 1920 was not paid to him until subsequent to that year. On the other hand Otto Lembeck, who was a coexecutor of the estate of Henry Lembeck, testified that the dividend in question was distributed in 1920. We are unable to find any ground for disturbing the determination of the respondent on that point.
The petitioner in his returns for 1919 and 1920 reported as salary received from the Brewing Co., the amount of $20,000 and $14,255, respectively. He now claims that he received $17,840.44 in 1919 and *253 $7,982 in 1920. On this point the testimony*2623 of the witness is conflicting and we find no basis for setting aside the action of the respondent.
The last question is whether the amount of $2,917.78 paid to the petitioner as executor's fees is income to him for 1920 or 1921. The evidence shows that while the fees in question were allowed by the Orphan's Court on October 1, 1920, they could be paid only on the joint action of the three executors. A check for the fees was drawn December 30, 1922, but because of the fact that the executors lived in different places it was not signed by all of them until some time subsequent to the year 1920, and was not received by the petitioner, or his trustee until January 31, 1921. We are not advised of the reason for the delay from October 1 to December 31, 1920, in making out the check, but the fact remains that the petitioner could not have drawn these fees from the estate without the concurrence of the other executors, and that he did not receive them until the year 1921. Since his accounts were kept on the basis of cash receipts and disbursements, it is our opinion that the fees in question were income to him in the year 1921.
Judgment will be entered under Rule 50