W. L. Moody Cotton Co. v. Commissioner
United States Tax Court
1. Petitioner, a cotton factor, kept its books and filed its returns since its incorporation in 1916 upon the cash basis as distinguished from the accrual basis, except that it accrued and reported as income certain interest on secured notes and accounts. During the taxable year 1937 it ascertained the obligations of the debtors for a part of such interest accrued in prior years to be worthless and deducted it and the principal as bad debts.
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1. Petitioner, a cotton factor, kept its books and filed its returns since its incorporation in 1916 upon the cash basis as distinguished from the accrual basis, except that it accrued and reported as income certain interest on secured notes and accounts. During the taxable year 1937 it ascertained the obligations of the debtors for a part of such interest accrued in prior years to be worthless and deducted it and the principal as bad debts. Held, since petitioner was predominantly upon the cash basis, it erred in accruing or charging on the interest in prior years and it could not correctly…
1Opinion of the Court
OPINION.
Black, Judge:
The issues are whether for the taxable year ended August 31, 1937. the respondent erred (1) in disallowing alleged bad debts totaling $77,088.28; (2) in disallowing an alleged bad debt in the amount of $34,832.39; (3) in determining that petitioner realized a gain from the sale of cotton in the amount of $21,913.52; and (4) in refusing to exclude from the income reported by petitioner $32,334.72 representing recoveries during the taxable year on debts which had been deducted by petitioner in prior years as bad debts without receiving any tax benefit therefrom. We shall…
2Cases cited2 opinions
- Doyle v. Mitchell Brothers Co.Supreme Court of the United States · 1918
- Waters v. B. F. Ellington & Co.Court of Appeals of Texas · 1926
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- Dell v. CommissionerUnited States Tax Court · 1995
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