Phillipson v. Commissioner

*487OPINION.

Smith:

The petitioner claims the right to deduct from his gross income of 1921 $20,000 representing an alleged debt ascertained to be worthless and charged off the petitioner’s books of account in 1921. The evidence with respect to the creation of this debt and the ascertainment of the worthlessness of it in 1921 is confusing and conflicting. The petitioner guaranteed an investment of $20,000 by Joseph Rashman in a partnership business conducted by the petitioner’s brother and J oseph Rasliman’s son. Apparently a note was given but the details concerning the note are lacking. Joseph Rash-man died within the last year or two and the petitioner made good his guarantee of the account by the payment in 1927 or 1928. He claims to have taken a note of his brother for the $20,000 which he had guaranteed to reimburse to J oseph Rashman in case the business of Phillipson & Rashman proved to be a failure, but his recollection as to whether a note was taken is very hazy and the note was last seen by an employee of the petitioner in 1917 or 1918.

*488Even if the debt were a bona fide obligation of Louis Phillipson to the petitioner prior to 1921, the evidence very clearly indicates that the account, if not worthless prior to 1921, was quite as worthless in 1917,1918, 1919 and 1920 as in 1921. The petitioner’s brother owned a few flats on Judd Street in Chicago, which had a value of only about $5,000 in 1917 and in 1921. The petitioner’s brother had no other property at the close of 1917 and he was working as a floor walker for the petitioner at a salary of $25 per week. -In 1921 his salary was $40 per week. Therefore, the financial condition of the brother was no worse in 1921 than in 1917. The petitioner deposed as follows:

Q. You figured lie [Louis Pliillipson] ought to be able to pay you $20,000?
A. In a certain time.
<2. In a certain time. Did you ever ask him to make an arrangement to pay you so much per week?
A. Well yes, he says he could not pay.
Q. Ho could not pay it, and you realized that in 1918, 1919 and 1920?
A. Yes.
Q. That he could not possibly pay it?
A. Yes.
Q. On the salary he was getting and the small rent he was getting?
A. Yes, sir.

The action of the respondent in disallowing the deduction of $20,000 from gross income of 1921 as a bad debt ascertained to be worthless and charged off during the year is sustained.

Judgment will be entered for the respondent.