Combs v. Commissioner

*249 Proceeding involving additional income tax liability for the calendar years 1920 and 1921, determined by the respondent in the amount of $1,910.23.

FINDINGS OF FACT.

Petitioner is an individual engaged in the undertaking business in Miami, Fla. On the birthday of one of his sons, on January 5, 1921, the petitioner presented the son with a one-sixth interest in the undertaking business. The gift was made as of January 1, 1921. In giving this interest to his son the petitioner retained and reserved to himself all accounts receivable as of December 31, 1920.

During the calendar year 1921 the petitioner collected, on account of the receivables above mentioned, an amount of $9,202.58. The respondent held that the petitioner accounted on the accrual basis and not on the basis of cash receipts and disbursements. Accordingly, the respondent treated the receivables in the sum of $9,202.58 as income for the calendar year 1920, and determined a deficiency in consequence. In his notice of the deficiency, the respondent advised the petitioner of a deficiency in tax for the*3563 years 1920 and 1921, amounting to $1,910.23. The statement accompanying the deficiency notice showed this amount of $1,910.23 to have been ascribed in its entirety to the year 1920.

The petitioner kept his accounts and reported his income on the basis of cash receipts and disbursements. The amount of $9,202.58 collected by the petitioner in 1921 on the receivables set out above, was not reported by the petitioner as taxable income either for the year 1920 or for the year 1921.

OPINION.

KORNER, Chairman: As a result of the findings of fact set out above, the tax should be recomputed by the respondent, and in such *250 recomputation the amount of $9,202.58 collected by the petitioner in the year 1921 should be eliminated from income of the year 1920 and added to petitioner's income for the year 1921. Since the petitioner accounted on a basis of cash receipts and disbursements, the respondent was in error in ascribing the $9,202.58 to the income for the year 1920.

Judgment will be entered on 15 days' notice, under Rule 50.