BIR Ruling No. 439-61

December 13, 1961 BIR RULING NO. 439-61 Respectfully returned to the Chief, Investigation Division, the income tax case of Elizalde Trading Corporation for the year 1959 with the information that bad debts are allowed as deductions in the year when ascertained to be worthless and not at the time when the taxpayer may finally "give up" on the possibility of recovering any part of the debts and decide to charge them off. (CCH '60 Vol. 2 p. 21,009) According to the report of Examiners Ernesto S. Victa and Maximino Tagle, the taxpayer in this case informed them that no collection could be made on account of the foreclosure of the chattel mortgage on the assets of the debtor by the Rehabilitation Finance Corporation on April 17, 1957. In his letter dated November 7, 1960 the taxpayer made the following statements: ". . . Likewise, a copy of the certificate of sale of the assets of the Marble Corporation of the Philippines was shown to your examiners indicating that, as a result of a foreclosure of the chattel mortgage, the properties were sold for P364,591.69 to the Rehabilitation and Finance Corporation, in settlement of the former's mortgage liability. The insolvency of the Marble Corporation became an actuality making the debt worthless precluding altogether any chance of collection, unless the debtor's finances are rehabilitated by the introduction of fresh capital." It is obvious that the taxpayer knew since April 17, 1957 that this indebtedness of the Marble Corporation has already become worthless. The amount of P59,494.45 representing accounts receivable from the Marble Corporation should therefore have been written off on April 17, 1957 and not in any subsequent year. (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue The above ruling was duly signed by the Commissioner of Internal Revenue on December 13, 1961. P. F. LANDAS Revenue Operations Head (Legal)