Krack v. Commissioner

Decided May 7, 1925

United States Board of Tax Appeals · decided 1925-05-07

Under the facts stated, held, that the worthlessness of a debt was not ascertained in the taxable years in question. Held: that the worthlessness of a debt was not ascertained in the taxable years in question.

Key passage — most relied on by later courts

“The disinclination of a creditor to force payment does not make a debt 'worthless,' as that term is used in [the statutory predecessor of section 166].”

quoted by 1 later decision, including MARKS v. COMMISSIONER

Good law ✅— No negative treatment on recordhow we know

Decided 1925-05-07

How this case has been cited

Cited by 7 later decisions — most recently September 1983

Later decisions citing this case, by decade. The current decade is in progress, and our corpus holds fewer opinions from the most recent years, so the latest bars are undercounted — not a real decline.

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¶1 *1120OPINION.

Green :

¶2We are unable to agree with the taxpayer in his contention that the advances should be charged off as bad debts. To be deductible in the years in question the debts must meet the requirements of section 214(a) (7) of the Kevenue Act of 1918, which is, “ Debts ascertained to be worthless and charged off within the taxable year.” In any year there were assets sufficient to have satisfied a part of the taxpayer’s claim, and this fact was known to him at all times. The disinclination of a creditor to force payment does not make a debt “ worthless,” as that term is used in the Act.

¶3The taxpayer’s contention that he has sustained a loss as the result of purchasing the stock is answered by saying that he still holds the stock of a going concern which hopes to show a profit for 1925. The transaction is not closed. The loss, if any, has not been realized. The taxpayer can have no deductible loss until such loss has been actually sustained.