Opinion ID: 778819
Heading Depth: 4
Heading Rank: 3

Heading: New Life Expectancy

Text: 34 Vanalco next contests the tax court's conclusion that the process of relining gave the entire cell a new life expectancy of three years. Vanalco asserts that this conclusion was error because the cell lining contributes very little to the average life of the entire cell. Specifically, Vanalco notes that the stipulated facts indicate that the weighted average life of a cell is approximately 40 years, with the lining contributing only one percent of this average life. Thus, according to Vanalco, this case is analogous to Libby & Blouin, 4 B.T.A. at 912-14, where the board of tax appeals held that the cost of replacing copper tubes with a two-to-four-year life span in a sugar evaporator machine with a 20-year life span was deductible as a business expense. Vanalco distinguishes the case cited by the tax court, Ruane v. Comm'r, 17 T.C.M (CCH) 865, 871 (1958), since that case dealt with costs associated with the reconditioning of an entire coke oven that had a life expectancy of only three to four years. 35 Again, resolution of this issue depends primarily on how one characterizes the relationship of the cell lining to the entire cell. Implicit in the discussion of a new life expectancy is the notion that if a component part is so integral to the overall functioning of a machine, its replacement effectively confers a new life span on the machine equivalent to the life of the part. Thus, if one were to agree with Vanalco that the lining is a relatively minor, frequently worn out part of a larger, more durable cell, there would be no basis to conclude that replacing the lining would breathe new life into the cell as a whole. In contrast, if one accepts the tax court's position that the cell lining is critical to the functioning of the cell and its replacement essentially constitutes a refurbishment of the entire cell, then it could be said that relining would confer a new life expectancy equivalent to that of the lining itself. 36 In light of the entire process of relining stipulated in the record, we conclude that the lining is a critical component of the cell and its replacement is tantamount to reconstituting the cell itself. Specifically, cell relining involved taking individual cells offline and rerouting the electrical current through the remaining cells in the cell line; removing the superstructure and cradle to a repair area where they were separately attended to; adding the cell lining in a number of layers, which included insulating block, heavy refractory fire brick, carbon sidewall blocks, and ramming paste; replacing the superstructure, anodes, and cell shields; and leaving the new lining and cathode blocks to bake for 48 hours. The entire process generally lasted 15 days and cost in excess of $20,000 dollars. Given that this relining process effectively rebuilt the cell, the tax court did not err in ruling that relining conferred a new life expectancy on the cell of three additional years.