Appeal of BANK OF WATERTOWN

Appeal of BANK OF WATERTOWN. Docket No. 812. Submitted May 5, 1925; decided May 21, 1925. H. MuTberger for the taxpayer. Jolm D. Foley, Esq., for the Commissioner. Before GijatipneR, Trammell, and Phillips. This appeal involves a deficiency in income and profits taxes of $67.69 for 1919, $41.22 for 1920, and $1,692.66 for 1921, a total of $1,801.57. In filing income-tax returns for the years involved, the taxpayer sought to take deductions for certain amounts as representing alleged losses on municipal, county, and corporation securities which it held. At the hearing the taxpayer waived its claim to a deduction of $900 alleged to represent loss on Grimes County, Tex., warrants. FINDINGS OF FACT. I. The taxpayer is a Wisconsin corporation with its principal office at Watertown, Wis. 2. Some time prior to 1914 it acquired $2,000 worth of securities of the City of Saltillo, Mexico; This town was raided and practically destroyed by a Mexican insurgent army under General Villa in 1913. No interest was paid on these securities after 1914, and in its income-tax return for 1919 the taxpayer claimed the sum of $2,000 as a bad debt. 3. In 1914 and 1915 the Alfalfa Valley Land Co. defaulted in payments on its bonds, some of which were held by the taxpayer. A bondholders’ committee took over the outstanding bonds, including those of the taxpayer, but did not sell the land or realize upon the assets of the company. The taxpayer, in its return for 1921, claimed a deduction as representing a loss on the bonds it had owned and transferred to the above-named committee. 4. In 1921 the taxpayer purchased bonds of the Midco Petroleum Co. which went into the hands of a receiver in that same year. The bonds were not foreclosed until about 1923. A deduction of $520, as representing loss on these bonds, was claimed by the taxpayer in its income-tax return for 1921. [MAJORITY] DEOISION. The determination of the Commissioner is approved. The taxpayer failed to prove by satisfactory evidence that the debts sought to be deducted had been ascertained to be worthless in the taxable years involved in this appeal.