Guaranty Trust Co. v. New York & Queens County Railway Co. 257 A.D. 824

In an action to foreclose a mortgage on property of the Steinway Railway Company, The United States of America filed an intervening petition against the receivers for the recovery of deficiencies in Federal income taxes assessed against the receivers for the years 1932 and 1933. Judgment unanimously affirmed, without costs. The respondents were entitled, under section 23, paragraph (b), of the Revenue Act of 1932 (47 U. S. Stat. at Large, 179), to deduct from gross income the interest accrued within each of the taxable years on the first mortgage bonds of the corporation. The refund of $127,863.66 in 1932 from the receiver of the New York *825and Queens County Railway Company for prior excess charges for electric power was not taxable income for the year in which the refund was received. Since the respondents kept their accounts and filed their income tax returns on an accrual basis, the amount refunded is to be allocated to the years in which overpayments were made. (Commissioner of Internal Revenue v. Old Dominion S. S. Co., 47 F. [2d] 148.) Present — Lazansky, P. J., Hagarty, Johnston, Taylor and Close, JJ.