Opinion
July 24, 1952.
Samuel Newfield, New York City, for debtor.
The debtor seeks to review a Referee's order denying its motion to expunge a portion of a tax claim filed by the United States. The total proof of claim filed by the Government amounts to $4994.13 of which $3261.05, based upon deductions by debtor for travelling, entertainment and general business expenses for the years 1945, 1946 and 1947, is at issue.
There is no doubt that the burden of establishing the claim rests upon the Government. The filing of a sworn proof of claim is sufficient to establish a prima facie case. It "compels the objector to go forward and produce evidence enough to rebut the claimant's prima facie case. (O)nce this is achieved, it is for the claimant to prove his claim, not for the objector to disprove it." These principles are applicable to tax claims asserted by the Government. Indeed great weight is attached to the effect of the Government's proof of claim in such cases.
3 Collier on Bankruptcy: 14th Edition, pp. 232-233.
3 Collier on Bankruptcy: 14th Edition, p. 2173; In re Clayton Magazines, Inc., 2 Cir., 77 F.2d 852.
In re Garfield Bag Stationery Co., D.C., 42 F. Supp. 708; In re Lang Body Co., 6 Cir., 92 F.2d 338; In re Raflowitz, D.C., 37 F. Supp. 202; In re Bradley, D.C. 16 F.2d 301.
In the instant case, the Debtor failed to meet its burden of going forward with sufficient evidence to rebut the prima facie case established by the sworn proof of claim. Many of the checks were drawn to the order of cash and an officer of the Debtor conceded that in fact he did not know the proceeds were expended for travelling and entertaining in furtherance of the business of the Debtor. He merely testified that the amounts deducted for these items were recorded on the corporate books and that it was the usual custom of the business to so record them. No amplification was made of these statements and the Debtor rested thereon. Although the witness testified that he had vouchers, bills, receipts and documents to substantiate the claimed payments in his possession, he failed to produce them, notwithstanding the request of the Referee for their production. Thus the debtor failed to negate the prima facie case of the Government. The fact that the tax agent allowed more than 90% of the claimed deductions in the absence of complete substantiation of some of the items does not aid the Debtor. It does indicate a generous approach in permitting such deductions.
Cohan v. C.I.R., 2 Cir., 39 F.2d 540; Rugel v. C.I.R., 8 Cir., 127 F.2d 393.
The Referee's order is affirmed.