Brosnan v. Undercofler

Jordan, Judge.

A deficiency tax assessment upon which an execution has been issued by the State Revenue Commissioner is presumed to be prima facie correct, and the burden is upon the taxpayer in his pleadings and proof to show clear and specific error or unreasonableness in the assessment. Head v. Edgar Bros. Co., 60 Ga. App. 482, 487 (4 SE2d 71).

The taxpayers’ attack upon the assessments and executions in issue here was predicated upon the grounds that the State Revenue Commissioner had refused to allow certain enumerated sums, designated as “sales discounts” and “bad debts,” as deductions from gross income in computing net income for tax purposes under the provisions of Code Ann. § 92-3109' (a, e). It was thus incumbent upon the taxpayers in order to set forth an issuable defense to allege sufficient facts to bring themselves within the statutory provisions permitting the claimed deductions. “Deductions from gross income in arriving at net income, on which an income tax is imposed, are allowed as a matter of legislative grace and are authorized only where there is a clear statutory provision for them. Accordingly, the burden rests upon a taxpayer to show that he is entitled to a deduction claimed.” 27 Am. Jur. 359, Income Taxes, § 93; Fulton Bag &c. Mills v. Williams, 212 Ga. 783 (2), 786 (95 SE2d 848); Oxford v. Chance, 104 Ga. App. 310, 315 (121 SE2d 825).

*97This burden the taxpayers did not sustain for it was not shown in their pleadings that the alleged sales discounts and bad debts which they sought to claim as deductions in arriving at their net income had ever been included by them in their gross income. “The words 'net income’ mean the gross income of a taxpayer, less the deductions allowed by this law.” Code Ann. § 92-3108. Clearly, sales discounts are not allowable as ordinary and necessary business expense deductions from gross income under the provisions of Code Ann. § 92-3109 (a) unless the total undiscounted sales have first been included by the taxpayer in his gross income; otherwise an unauthorized double deduction could be claimed. The same is true of bad debts. Code Ann. § 92-3109 (e) specifically provides: “Bad debts.— Debts ascertained to be worthless and actually charged off within the taxable year, (or, in the discretion of the Commissioner, a reasonable reserve created for bad debts), provided the amount had previously been included in gross income in a return of income filed with the State. No deduction with respect to loans to relatives and friends shall be allowed as a bad debt or otherwise.”

Accordingly, the assessments of the State Revenue Commissioner upon which the executions were issued being prima facie correct, and the taxpayers in their pleadings having failed to show clear and specific error in them, it was not error for the trial court to sustain the general demurrers of the State Revenue Commissioner.

Judgment affirmed.

Bell, P. J., and Eberhardt, J., concur.