Houghton & D. Co. v. Commissioner
United States Board of Tax Appeals
1. In 1920 petitioner's subsidiary was insolvent, and petitioner caused it to discontinue business and assumed its liabilities.
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1. In 1920 petitioner's subsidiary was insolvent, and petitioner caused it to discontinue business and assumed its liabilities. Held, that petitioner is entitled to deduct the cost of its stock in the subsidiary as a loss sustained in 1920; that petitioner is entitled to a bad debt deduction in the amount owed to it by the subsidiary; and that the amount estimated to be necessary to redeem trading stamps issued by the subsidiary is deductible as an accrued expense. 2. The receipt by petitioner of its own stock in partial settlement of an account for which a bad debt deduction had been allowed…
1Opinion of the Court
*56OPINION.
Aeundell :
Petitioner claims that as a result of the abandonment of the business of the Stamp Company in 1920 it is entitled to a loss deduction of $32,500, consisting of $25,000 cash paid for stock and $7,500 organization and promotion expenses; a bad debt deduction in the amount of $7,414.06, which was the amount owed to it by the Stamp Company; and, as either an expense or loss deduction, the amount of $53,782.24, being the Stamp Company’s reserve for re-*57clemption of stamps, or in the alternative the portion thereof, $41,783.42, which petitioner set up on its books as a liability.
Cla…
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