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*828OPINION.

Lansdon:

At the close of the year 1921, petitioner charged off $10,796.01 as bad debts ascertained to be worthless and deducted said amount from the gross income reported by him for that year. According to the deficiency notice, the respondent disallowed said deduction for lack of evidence as to whether certain items included therein had been reported as income during the current year or some *829prior year, and on account of insufficient evidence as to whether the remaining items were, in fact, ascertained to be worthless and charged off during the taxable year 1921.

The petitioner conceded that $1,164.98 of the deductions so taken was erroneous, leaving the sum of $9,631.03 as the amount involved in this proceeding. As indicated by our findings of fact, the petitioner deducted $2,134.39 as representing a worthless account resulting from the bankruptcy of the Davidson Diamond Jewelry Co. The court order confirming the composition offered by the bankrupt to its creditors discloses that the petitioner received in 1921, 50 per cent of the debt. We are therefore of the opinion that in 1921 the petitioner actually ascertained that only the remaining 50 per cent (or $1,778.67) of the Davidson Diamond Jewelry Co. account was worthless. The petitioner’s bad debt claim with respect to the Davidson Diamond Jewelry Co. account is therefore allowed to the extent of $1,778.67 and disallowed as to the remainder, or $355.72.

The debts owing to the petitioner from R. Steiner, Liberty Loan Shop, West Side Diamond Shop, Louis A. Cohen, and Joseph Weiss, resulted from sales negotiated by an agent or broker (Toepfer). Inasmuch as the promissory notes of these debtors held by the petitioner had been made payable to the agent or broker and endorsed by him, on delivery thereof, to the petitioner, it seems advisable to determine whether the petitioner held a legal claim against said agent as endorser. There was an unwritten agreement between the petitioner and said agent that the latter would not be liable on these notes after having endorsed and delivered them to the former. The true intention of endorsers to a negotiable instrument, as between themselves, can always be shown by oral evidence. Kohn v. Consolidated Butter & Egg Co. (1900) 63 N. Y. S. 265, 266; Witherow v. Slayback (1899) 158 N. Y. 649; 53 N. E. 681.

On the facts disclosed by this proceeding it is clear that the petitioner held no legal claim against his agent on presentation of the promissory notes to their makers for payment and default in payment.

We are of the opinion that the petitioner has established that debts in the amount of $9,275.31 were ascertained by him to be worthless and charged off at the end of the taxable year 1921 and, as such, are allowable deductions from gross income for that year.

Judgment will be entered on 15 days’ notice, under Rule 50.

Considered by Green and Artjndell.

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