Burnet v. Huff
288 U.S. 156 (1933)

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U.S. Supreme Court

Burnet v. Huff, 288 U.S. 156 (1933)

Burnet v. Huff

No. 58

Argued December 6, 1932

Decided February 6, 1933

288 U.S. 156

Syllabus

1. Under the Revenue Act of 1918, to permit deduction of loss incurred "in trade or business" or "in any transaction entered into for profit," the loss must have been "sustained during the taxable year" -- it must be actual and present in that year; the mere existence of a liability, afterwards liquidated, is not enough. P. 288 U. S. 159.

2. One of two partners, in 1920, embezzled money from a trust fund held by the firm, and paid it to the other (who was innocent) in discharge of the firm's indebtedness to him. The other discovered the theft that year, and, in the year following, when the firm ceased business and was settled up, he restored to the fund the full amount, paying part with the firm's remaining assets and the rest from his own pocket.

Held:

(1) That, under the Revenue Act of 1918, the amount so repaid was not deductible as a loss incurred by him in 1920. P. 288 U. S. 161.

Page 288 U. S. 157

(2) The amount due him from his firm was not deductible under § 214(a)(7), Revenue Act of 1921, a a debt "ascertained to be worthless" during the year 1920, since the result of the firm's business were not known prior to 1921, and no portion of the debt was previously ascertained to be worthless. P. 288 U. S. 162.

56 F.2d 788 reversed.

Certiorari, 286 U.S. 541, to review the reversal of a decision of the Board of Tax Appeals, 20 B.T.A. 516, which sustained the Commissioner's ruling against a deduction in an income tax return.

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