The opinion of the court was delivered by: BARD
This is an action by the executrix of Daniel B. Wentz, Jr., for a refund of income tax paid by the decedent for the year 1937. I make the following special
1. On August 4, 1930, Wentz lent Oliver F. Taylor, a personal friend of long standing, $10,000 on the latter's promissory note payable in five years with six per cent interest.
2. On August 4, 1935, Taylor gave Wentz, in place of his original note, a new note for $13,000, representing the original loan with accrued interest, payable in five years, with six per cent interest thereon.
3. At the same time Taylor took out a term insurance policy in the amount of $15,000, with Wentz as beneficiary, as security for the repayment of the note, and agreed to pay the premiums to maintain this policy in force.
4. Taylor never repaid any of the amount borrowed, nor did he pay any interest thereon to the decedent or to his executrix.
5. In April, 1937, Taylor turned over all his assets to his wife to satisfy her marital demands, and he so advised Wentz. Included therein was the insurance policy turned over by Wentz at the request of Taylor and then assigned to Taylor's wife.
6. Between April and August, 1937, Wentz told his secretary, Schreck, not to send any more interest bills, after the Sugust bill, to Taylor because the latter was "broke". Schreck made a memorandum of this at the time and placed it in the file.
7. Wentz kept no books except a cash memorandum book in which he entered cash expenditures and receipts.
9. Wentz's income tax returns had for some years been prepared by W. S. Holland, who acted as a bookkeeper for him.
10. Wentz's 1937 income tax return, prepared by Holland, was signed by Wentz on March 10, 1938.
11. No bad debt deduction was claimed by Wentz in his 1937 income tax return ...