Case Name: Appeal of RICHMOND LIGHT & RAILROAD CO. and NEW JERSEY & STATEN ISLAND FERRY CO.
Court: United States Board of Tax Appeals
Jurisdiction: United States
Decision Date: 1926-04-23
Citations: 4 B.T.A. 91
Docket Number: Docket No. 5060
Parties: Appeal of RICHMOND LIGHT & RAILROAD CO. and NEW JERSEY & STATEN ISLAND FERRY CO.
Judges: Before Phillips and Trammell.
Reporter: Reports of the United States Board of Tax Appeals
Volume: 4
Pages: 91–93

Head Matter:
Appeal of RICHMOND LIGHT & RAILROAD CO. and NEW JERSEY & STATEN ISLAND FERRY CO.
Docket No. 5060.
Submitted December 29, 1925.
Decided April 23, 1926.
Francis J. Sweeney, Esq., for the taxpayer.
John D. Foley, Esq., for the Commissioner.
Before Phillips and Trammell.

Opinion:
OPINION.
Trammell
: The taxpayer alleges that the Commissioner excluded $969,477.34 from invested capital on account of an arbitrary segregation of accounts, but the allegation that the accounts were arbitrarily segregated, even if conceded to be true, would not be sufficient to overcome the presumption of correctness of the determination of the Commissioner on this point. The amount was disallowed by the Commissioner, according to his determination set forth in his 60-day letter, on account of the fact that " no value of the intangible assets having been proven, the total book value has been eliminated from your invested capital."
The taxpayer introduced no evidence as to values of any intangible assets acquired for stock or to sustain its claim for additional depreciation, nor has the taxpayer introduced any evidence which would enable the Board to determine what the inadmissible assets were or any evidence with respect thereto in order that we may determine whether the Commissioner correctly excluded the amount thereof from invested capital.
The only facts material to the consideration of this appeal which the Board has before it are .those which were stipulated by counsel. They relate entirely to the reserves which were set up for casualties and damages.
The taxpayer contends that reserves set up by it at the end of each of the years involved to pay damages subsequently to be determined to be due by it on account of accidents and casualties happening during the respective years are deductible. With this contention we can not agree. Reserves for such purposes are not deductible in determining net income. Appeal of William J. Ostheimer, 1 B. T. A. 18; Appeal of Pan-American Hide Co., 1 B. T. A. 1249; Appeal of Morrison-Ricker Mfg. Co., 2 B. T. A. 1008; Appeal of Stokes Milling Co., 2 B. T. A. 1284. If the actual amount of damages so determined in subsequent years be held to relate back to the years when the accidents or casualties on which they are based occurred, we have no evidence as to the amounts attributable to each of such years, and it is not necessary to decide such principle.
The taxpayer contended that the invested capital should also be adjusted in accordance with the opinion of the Board in the Appeal of Guarantee Construction Co., 2 B. T. A. 1145. The Revenue Act of 1926, in section 1207, makes specific provision relating to this question which is retroactive and governs this case. The adjustment made by the Commissioner is in accordance with the statute. Appeal of Russel Wheel & Foundry Co., 3 B. T. A. 1168.
In his answer the Commissioner admitted various errors which will be corrected in computing the deficiency.
Order of redetermination will he entered on 10 days' notice, under Rule 50.