Davis-McGee Mule Co. v. Commissioner

*959OPINION.

Petitioner alleges overstatement of the gross sales reported in the returns of the two years in controversy, with corresponding overstatements of net income for those years. It computes the overstatement for each year in the following manner:

1919

Total cash deposits at Bank of Anderson_$358, 791. 89

Less: Proceeds of discounted notes (borrowed funds)- 37,120.72

Cash receipts from sales and collections_ 321,671.17

*960Add: Increase in accounts receivable for tbe year:

Accounts receivable at Dec. 31, 1919-$23, 541. 30

Accounts receivable at Jan. 1, 1919- 14,210. 55 $9,330. 75

Gross sales for 1919_ 341, 001.92

Gross sales reported in return_ 353, 862.05

Overstatement of gross sales in return_ 12, 060.13

There is a mathematical error of $10,000 in adding the increase in accounts receivable to the cash receipts from sales and collections, in arriving at gross sales, and an error of $800 in substracting gross sales for 1919 from gross sales reported in the return. If the basic figures are correct, the gross sales should be $331,001.92, and the overstatement should amount to $22,860.13.

1920

Total cash deposits at Bank of Anderson-$476', 563.95

Less: Proceeds of discounted notes (borrowed funds)_ 25, 000. 00

Cash receipts from sales and collections- 451, 563. 95

Add: Increase in accounts receivable for the year:

Accounts receivable at Dec. 31, 1920-$45, 532. 41

Accounts receivable at Jan. 1, 1920- 22, 894. 01 22,638. 40

Gross sales for 1920- 474,202.35

Gross sales reported in return_ 489,873. 52

Overstatement of gross sales in return- 15, 671.17

The petitioner’s computations to arrive at the gross sales for both years assume the figures relating to the increase in accounts receivable for both years, and borrowed funds for 1920. These have not been proven. Furthermore, the evidence indicates that the total deposits for 1920 were $521,184.53 instead of $476,563.95. The allegation in the petition that the accounts receivable at the beginning of 1919 and at the close of 1920 were $14,210.55 and $45,532.41, respectively, was denied in respondent’s answer, and petitioner offered no evidence in support of its allegation. The person who kept the petitioner’s books of account and prepared the returns for the years under review testified that the proceeds of discounted notes, for 1920, amounted to $20,000, while the later bookkeeper, testifying from the same books, stated that they amounted to $54,999. We are unable to determine from the record which is the correct amount.

Judgment will be entered for respondent on 15 days’ notice, under Rule 50.