
    Joseph V. Horn, Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 43695.
    Promulgated July 14, 1931.
    
      
      A. E. James, Esq., for the petitioner.
    
      R. S. Scott, Esq., for the respondent.
   OPINION.

McMahon:

There is no controversy between the parties in this proceeding as to the facts. It is agreed between them that the amount of $12,850 paid in 1925 by the petitioner, who operated upon the cash receipts and disbursements basis, was the correct amount of gift tax due under section 319 of the Revenue Act of 1924 as it existed in 1925. However, section 324 (a) of the Revenue Act of 1926 amended section 319 of the Revenue Act of 1924 to reduce the tax upon gifts made in 1924 and 1925, and subdivision (b) of that section provided that subdivision (a) should take effect as of June 2, 1924. The parties are in agreement that the amount of $3,545.06, which the respondent refunded to the petitioner in 1926 pursuant to section 324 (b) and section 325 of the Revenue Act of 1926, was the proper amount by which section 324 (a) of the Revenue Act of 1926 reduced the tax due from the petitioner.

It is the contention of the petitioner that regardless of the fact that a refund was made to him in 1926, he is still entitled, in computing his income tax for the year 1925, to deduct the full amount of $12,850, since that was the amount which was due and payable during that year as gift taxes, and which he actually paid in that year. Petitioner relies upon section 214 (a) of the Revenue Act of 1926, which provides in part as follows:

(a) In computing net income there shall be allowed as deductions:
* * ⅝ * * * ⅜
(3) Taxes paid or accrued within the taxable year except * * * [exceptions not material].

We find ourselves unable to agree with the contention of the petitioner. Prior to the time that petitioner filed his income-tax return for the year 1925 the Revenue Act of 1926 was passed and is, in so far as we are here concerned, applicable to the year 1925. See section 1200 of the Revenue Act of 1926. Section 214 of that act, in providing that there shall be allowed as deductions taxes paid within the taxable year, contemplates taxes legally required to be paid. As pointed out above, that act, in section 324 (a), amended section 319 of the Revenue Act of 1924 to reduce, effective as of June 2, 1924, the tax upon gifts made in 1924 and 1925. It follows, therefore, that, under section 214 (a) (3) of the Revenue Act of 1926, petitioner is entitled to no greater deduction for gift taxes paid in 1925 than he was required to pay under the provisions of section 319 of the Revenue Act of 1924 as amended by the Revenue Act of 1926.

Inland Products Company, 10 B. T. A. 235; affd., Inland Products Co. v. Blair, 31 Fed. (2d) 867; and Philip C. Brown et al., 10 B. T. A. 1122. See also Mary W. Leach, 16 B. T. A. 781; affd., Leach v. Commissioner, 50 Fed. (2d) 371.

We conclude that the respondent did not err in reducing the petitioner’s claimed deduction of $12, 850 by the amount of $3,545.06.

Judgment will he entered for the respondent.  