
    Appeal of METROPOLE HOTEL CO.
    Docket No. 3075.
    Submitted June 16, 1925.
    Decided September 7, 1925.
    
      Fred L. Pecvrce, O. P. A., for the taxpayer.
    
      George G. Witter, Esq., for the Commissioner.
    Before Ivins, MaRQuette, and Morris.
   This appeal is from a determination of a deficiency in income and profits taxes for the year 1920 in the amount of $1,058.15.

The taxpayer claims a net loss for the calendar year 1919 as a credit against the net income of 1920, whereas the Commissioner contends that the taxpayer was on a fiscal year basis and not entitled to a deduction for a net loss.

In proof of the taxpayer’s contention there were introduced in evidence the taxpayer’s journal for the period from July 1,1917 to 1922, the ledger for the period from July 1, 1917 through December 31, 1919, and monthly reports made to the taxpayer by its auditor for the period from July 1, 19.17 through December 31, 1919. The taxpayer claimed that those records showed that it closed its books monthly and that as it had no annual accounting period it was entitled to file its tax returns on a calendar year basis under section 212 (b) of the Revenue Act of 1918.

From the testimony and exhibits introduced in evidence at the hearing the Board makes the following

FINDINGS OF FACT.

The taxpayer is an Illinois corporation with principal office in Chicago, where, since July 1, 1917, it has engaged in the business of operating a hotel.

It succeeded to the business theretofore conducted by Mrs. Ella F. D. Kennett, under the name of Metropole Co. The taxpayer had a capital stock of $25,000, of which $24,800 was issued on organization to Mrs. Kennett for the hotel furnishings, accounts receivable, inventories, and other assets having a book value of $34,270.89, and the taxpayer assumed her liabilities, totaling $9,270.89 Mrs. Kennett retained the land and buildings and rented the same to the taxpayer for $45,000 a year.

Evidenced by the journal and the monthly reports rendered to the taxpayer by its auditor, the taxpayer first closed its books on June 30, 1918; it next closed its books on June 30, 1919; again on December 31,1919; and thereafter on December 31 of 1920 and 1921.

The annual accounting period of the taxpayer under the Revenue Act of 1918 was the fiscal year ending June 30.

The taxpayer filed a return for the six months from July 1 to December 31, 1917, and for each calendar j^ear thereafter. In its return for the calendar year 1919 the taxpayer showed a net loss of $28,261.71. As the result of an audit of the taxpayer’s books, the Commissioner determined that the taxpayer’s annual accounting period was the fiscal year from July 1 to June 30 next following, and disallowed the net loss of the calendar year 1919 as a deduction from the net income of the calendar year 1920 and determined a deficiency in tax for the taxable year 1920 in the amount of $1,058.15. From that determination the taxpayer duly appealed.

DECISION.

The determination of the Commissioner is approved.

ARtjndell not participating.  