Transatlantic Clock & Watch Co. v. Commissioner
United States Board of Tax Appeals
The taxpayer corporation set up a reserve for bad debts at the close of its fiscal year ended September 30, 1922, in the amount of $5,000. In its income-tax return for such fiscal year it deducted from gross income $4,302.14 on account of bad debts ascertained to be worthless and charged off during the year, and in addition the $5,000 set up as a reserve for bad debts at the close of the year.
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The taxpayer corporation set up a reserve for bad debts at the close of its fiscal year ended September 30, 1922, in the amount of $5,000. In its income-tax return for such fiscal year it deducted from gross income $4,302.14 on account of bad debts ascertained to be worthless and charged off during the year, and in addition the $5,000 set up as a reserve for bad debts at the close of the year. Held, that the taxpayer was entitled to the deduction of only a reasonable addition to a reserve for bad debts and not to the deduction of debts ascertained to be worthless plus an addition to the…
1Opinion of the Court
*1065OPINION.
Smith:
During the years 1920 to 1923 the taxpayer’s business increased rapidly. The taxpayer dealt with customers throughout the United States. Its experience showed that a considerable percentage of accounts which had been uncollected for more than 90 days were never collected. Prior to the enactment of the Revenue Act of 1921 it was not permitted to deduct from gross income any amount set up as a reserve for bad debts. In lieu thereof it claimed in its returns the deduction from gross income of debts actually ascertained to be worthless and charged off during the taxable year. *1066When…
2Cited by10 opinions
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- Rogan v. Commercial Discount Co.Court of Appeals for the Ninth Circuit · 1945
- Manistique Lumber & Supply Co. v. CommissionerUnited States Board of Tax Appeals · 1933
- Apollo Steel Co. v. CommissionerUnited States Tax Court · 1945
- Carp v. CommissionerUnited States Tax Court · 1961
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