Marks v. Commissioner

*729 This proceeding is for the redetermination of a deficiency in income tax for 1920 in the amount of $2,181.06.

The deficiency arises from the action of the respondent in increasing the taxable income reported by the petitioner in his return to the extent of $10,847.10.

FINDINGS OF FACT.

The petitioner is a traveling salesman. During 1920 and prior thereto he was employed by S. Rauh & Co. on a commission basis. During 1920 he earned commissions in the amount of $29,047.85. Of that amount he received in cash $18,200.75. The amount of $10,847.10 was not actually received by him until 1921. The entire amount of commissions was credited to the petitioner on the books of S. Rauh & Co. as of December 31, 1920.

Prior to 1920 the petitioner had the privilege of drawing on his account. His commissions were available to him at any time. The situation was different however in 1920. The petitioner made a request prior to December 31, 1920, for the balance due*3424 him as commissions but was told that the books had not been made up and for that reason the balance could not be paid him. The books were closed in the early part of 1921 when the amount was credited as of December 31, 1920. He was unable to draw on his account or to receive the amount of his commissions due him until 1921. Prior to 1920 the petitioner had filed his income-tax returns upon the accrual basis and in 1919, he reported a gross income of $31,319.53, but he had received in cash during that year only $15,603.04. The balance making up the $31,319.53, that is, the amount of $15,716.49, was not actually received by the petitioner until 1920.

*730 The petitioner in 1920 filed his income-tax return on the basis of cash receipts and disbursements. No authority was requested of the respondent to change the basis of reporting income. The income earned in 1919 but actually received in 1920 was not included in the income reported by the petitioner in 1920.

The petitioner kept no books of account. The only record of the commissions earned and cash received were kept by the company by whom he was employed and the petitioner referred to those books for the purpose*3425 of determining the amount earned and received by him.

OPINION.

TRAMMELL: The petitioner kept no books of account. He reported his income for 1920 on the basis of cash receipts and disbursements which, in view of all the facts, is the correct method of reporting his income. See . During 1920 he did not receive the amount of $10,847.10 which the respondent has added to his taxable income for that year. He received only the amount of $18,200.75 of the earnings for 1920.

From all the evidence, we are of the opinion that the gross income of the petitioner in 1920, on the basis of cash receipts and disbursements, was $18,200.75.

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

SMITH dissents.