Eisner v. Commissioner

MILTON D. EISNER, EXECUTOR, ESTATE OF MILTON S. EISNER, PETITIONER, V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Eisner v. Commissioner

Docket No. 8548.

United States Board of Tax Appeals 9 B.T.A. 210 ; 1927 BTA LEXIS 2643 ; November 21, 1927 , Promulgated *2643 Where a decedent kept his books and records on the basis of cash receipts and disbursements only the amounts actually expended during the taxable period involved in the payment of taxes are allowable as deductions in determining his net income.

Fred D. Bullock, C.P.A., for the petitioner.

A. H. Murray, Esq., for the respondent.

TRAMMELL *210 This is a proceeding for the redetermination of a deficiency in income tax for the taxable period ended October 8, 1921, in the amount of $990.98. The deficiency arises from the action of the respondent in refusing to allow as a deduction the amount of taxes which had accrued but which had not been paid during the taxable period, the decedent in whose behalf the executor filed the return, having kept his books and accounts upon the basis of cash receipts and disbursements.

FINDINGS OF FACT.

All of the facts were stipulated as follows:

Milton S. Eisner died October 8, 1921; in his lifetime he was the owner of certain real estate which was acquired by him prior to *211 January 1, 1921, which was owned by him during the entire period January 1, 1921, to October 8, 1921, and continued in the *2644 possession and control of Milton D. Eisner as executor of his estate during the period October 9, 1921, to December 31, 1921.

Under the last will and testament of the said Milton S. Eisner, hereinafter called the decedent, Milton D. Eisner was appointed and duly qualified as the executor of the estate of decedent.

Acting in his capacity as executor of the last will and testament of decedent, Milton D. Eisner executed and filed an individual income-tax return for decedent for the period January 1 to October 8, 1921.

The books of decedent in years prior to his death, and during the period from January 1 to October 8, 1921, were kept on the basis of cash receipts and disbursements, and his returns for years prior to his death were filed on the calendar year basis.

During the entire calendar year 1921, there was received by decedent and his executor, the said Milton D. Eisner, as income from rents, the sum of $17,363.88.

Of the foregoing sum of $17,363.88, there was received by decedent during the period from January 1 to October 8, 1921, the sum of $12,986.88, which latter sum was included by the said Milton D. Eisner in the individual income-tax return filed by him on *2645 behalf of decedent for the period from January 1 to October 8, 1921.

Of the foregoing sum of $17,363.88, there was received by Milton D. Eisner, executor of the estate of decedent, during the period from October 9 to December 31, 1921, the sum of $4,377.

During the entire calendar year 1921, the taxes imposed by the city and county upon real estate owned by decedent prior to his death amounted to $3,837.63.

Prior to his death, and during the period from January 1 to October 8, 1921, there was paid by decedent on account of the foregoing city and county taxes imposed upon the said real estate owned by decedent the sum of $1,202.92, which constitutes the second installment of said real estate taxes for the fiscal year 1920-1921.

During the period from October 9 to December 31, 1921, there was paid by Milton D. Eisner, as executor of the estate of decedent, on account of the foregoing city and county taxes imposed upon the real estate owned by decedent, the sum of $2,634.71.

In determining the deficiency tax in controversy the Commissioner allowed as a deduction only the amount of the city and county taxes paid by decedent during the period from January 1 to October 8, 1921, to *2646 wit, the sum of $1,202.92.

Under the provisions of Part III, Title IX, of the Political Code of the State of California, taxes imposed by the city and county *212 upon real estate are levied upon the basis of the fiscal year commencing July 1 and ending June 30, and become a lien on the first Monday in March preceding the fiscal year.

Under the provisions of Part III, and Title IX, of the Political Code of the State of California, taxes imposed by the city and county upon real estate are payable as follows: The first installment becomes due and payable on the third Monday in October and delinquent on the first Monday in December, and the second installment becomes due and payable on the first Monday in January and delinquent on the last Monday in April.

The sum of $2,634.71, representing the amount of taxes imposed by the city and county upon the said real estate owned by decedent, and paid by Milton D. Eisner, executor of decedent's estate, during the period from October 9 to December 31, 1921, constitutes the first installment of real estate taxes imposed by the city and county for the fiscal year 1921-1922.

OPINION.

TRAMMELL: The question to be determined on *2647 the basis of the facts stipulated is whether the said Milton D. Eisner, executor of the estate of decedent, is entitled to prorate the said sum of $2,634.71 over the period commencing July 1, 1921, and ended December 31, 1921. That is to say, whether he is entitled to take as a deduction in the period ended October 8, 1921, the sum of $1,431.90, which sum bears the same ratio to the said sum of $2,634.71 as the period commencing July 1, 1921, and ended October 8, 1921, bears to the entire period commencing July 1, 1921, and ended December 31, 1921, or whether, the same having been actually paid after decedent's death as aforesaid, it must be taken as a deduction entirely in the period commencing October 9, 1921, and ended December 31, 1921.

Since the decedent kept his books and records upon the basis of cash receipts and disbursements, only the amounts actually expended during the taxable period involved in the payment of taxes are allowable as deductions in determining his net income. Taxes are allowed as deductions by the statute when paid or accrued according to whether a taxpayer keeps his books and records on the cash basis or accrual basis but it is only when he keeps his *2648 books and records on the accrual basis that he is entitled to take as deductions taxes accrued but not paid.

Judgment will be entered for the respondent.

Considered by MORRIS, MURDOCK, and SIEFKIN.