Akron Auto Garage Co. v. Commissioner

*1067 Before STERNHAGEN, TRAMMELL, and PHILLIPS.

This appeal involves a deficiency in income and profits taxes for 1919 of $1,967.80, and an overassessment for 1920 of $870.82, resulting in a net deficiency of $1,096.98.

FINDINGS OF FACT.

The taxpayer was a corporation, having its principal place of business at Akron, Ohio. In 1917 it entered into a contract with the Holmes Automobile Co. to make 4,000 oil pumps at $6.00 each, and it actually made about 1,800 pumps in the years 1917 to 1919, inclusive. At the close of 1919 it had standing on its books an investment of $5,138.44, representing the amount expended for the manufacture of pumps under the contract. The making of pumps had facture of pumps under the contract. The making of pumps had been discontinued by that time and, believing the Holmes Company to be in bad financial condition and that no additional pumps would be required, the taxpayer charged off said amount of $5,138.44 and took a deduction on account thereof in its 1919 income and profits tax return as a debt ascertained to*2684 be worthless.

In 1920, the Holmes Company, desiring additional pumps from the taxpayer, paid it $4,173.52, representing a portion of the investment in pumps, as consideration for the cancellation of the 1917 contract, and pumps were thereafter made upon a different basis.

Subsequent to 1920 the business of the taxpayer was sold, but no evidence was introduced as to the extent to which the pump investment entered into any sale price, loss on liquidation, inventory, or otherwise.

The Commissioner disallowed the deduction in 1919 of the amount of $5,138.44, resulting in a deficiency in tax for that year.

DECISION.

The determination of the Commissioner is approved.