Document: 364 U.S. 122 80 S.Ct. 1420 4 L.Ed.2d 1603 HERTZ CORPORATION, a corporation (Successor by Merger to J. Frank Connor, Inc., corporation), Petitioner,v.UNITED STATES of America. No. 283. Argued March 30, 1960. Decided June 27, Mr. Edgar Bernhard, Chicago, Ill., for petitioner. Howard A. Heffron, Washington, D.C., respondent. Justice CLARK delivered the opinion Court. 1 This case, like 141, Massey Motors, v. United States, and 143, Commissioner Internal Revenue Evans, 92, 1411, involves depreciation allowable on cars trucks used petitioner's predecessor in its automobile rental business during years 1954—1956, inclusive. The taxpayer elected avail itself accelerated method provided § 167(b)(2)1 Code 1954, 26 U.S.C.A. 167(b)(2)—known as 'the declining balance method.' Section 167(c) limits use this property 'with useful life 3 or more.' applicable Treasury Regulations Depreciation, 1.167(a)—1(b), T.D. 6182, 1956—1 Cum.Bull. 98, issued 1956, define 'period over which asset may reasonably be expected his trade * *.' Admittedly, if regulation is valid, taxpayer's passenger covered it would not meet three-year requirement 167(c). denied petitioner right those cars. What we have said supra, disposes contention meaning 'useful life' here. We therefore hold, did Court Appeals, 268 F.2d 604, that involved here valid 2 remaining issues pose questions relate concededly had excess three were subject under authorized 167(b)(2). 1956 subsequent some tax claim, was applied Commissioner. He ruled salvage value at time disposition must accounted equation. Petitioner contended resulted retroactive application and, any event, invalid because 1954 Code. After paid assessed refund, case filed. trial court held favor petitioner, but Appeals reversed. It only declaratory existing law computed granted certiorari, 361 811, 88, 60, heard companion supra. agree with result reached Appeals. succeeded merger July 1956; taxes accrued against Connor fiscal 1955, 1956. engaged renting leasing automobiles trucks, without drivers, pertinent years. In preparation returns ending 31, claimed basis four-year life. so paid. Subsequently, after merger, filed claims refund all claim based an election accordance 1.167(c) 1(c) Code, relating depreciation.2 see nothing application. chose own weapon, began struggle late date, dannot allowed abandon it. As issue, that, chose, Congress built artificial value, i.e., amount regulation, however, says 'in no event shall depreciated below reasonable value.' issue narrow one whether congressional authorization providing depreciation, term 'reasonable allowance' include allowance 'computed regulations prescribed Secretary delegate.' 167(b). think is. 5 pointed out cases, purpose accounting allocate expense using various periods are benefited asset. permits rapid rate early asset's has permitted exceed twice 'straight line' rate, approved application, computes straight-line percentage then doubles first year. doubled each year balance. Because belief most assets do lose more earlier years, justified attempt level off total costs, including maintenance expense, will generally greater later means, even Commissioner's theory, disposed what business, taken greatly difference between purchase price retirement price; conscious choice permit depreciation. But this, hypothesis, unusual situation. There inherent system requires us assume should beyond appears received when retired. knowing distortion employing point reached. interpretation does comport overriding statutory deduction allowance. 167(a). 6 challenging relies upon following excerpt from S.Rep. 1622, 83d Cong., 2d Sess. 201: 7 'The deducted prior applying since expiration there remains undepreciated represents 8 consistent part sentence, rate. contends contrary second sentence equate mathematical residue always exist system. This, us, recognition theoretical left. 'represents value' true exceeds amount, latter controls. Moreover, can carry fundamental concept depreciation—that such together effectuate recovery cost period Furthermore, House Report changes made your committee's bill merely affect timing ultimate deductions respect property.'3 Senator Humphrey stated '(t)he increased same sum given Hearings before Senate Committee Finance, Sess., Pt. 1, 95. Both these statements clearly support since, prevailed, able take than method, limited scrap value. 9 also seems rely administrative interpretation. cites footnote known Form 2106, Item 41 reads, 'Salvage estimated resale trade-in vehicle, determined purchase. If used, disregard computing depreciation.' direct instruction 'disregard entirely into However, inclined give weighty consideration. form worksheet refer fact disregarded outset equation, likewise place weight peripheral arguments ignored altogether method. 10 judgment affirmed. 11 Affirmed. 12 (For HARLAN, joined WHITTAKER STEWART, page 107, 1424.) 13 views DOUGLAS, 121, 1431.) statute provides: '(b) delegate, methods: '(1) straight line '(2) exceeding been annual described paragraph (1), 1.167(b)—2. DECLINING BALANCE METHOD.—(a) Application method.—Under uniform unrecovered other property. section 167(f), adjusted previously allowable, adjustments 1016 provisions law. resort formula. Such 167(b)(2) appropriate adjustment salvage. While account determining allowances (or account) See 1.167(c)—1 restrictions '§ 1.167(c)—1. LIMITATIONS ON METHODS OF COMPUTING DEPRECIATION UNDER SECTION 167(b)(2), (3), AND (4). '(c) Election methods.—Subject limitations set forth (a) above, methods specified (4) adopted permission formal required. order elect he need compute thereon taxable December 1953, him. binding acquisitions similar up separate accounts. return required September 15, 167(b) change amended 1956.' H.R.Rep. 1337, 25. Millikin statement floor Senate, preceded observation cannot way presented matter suggests mean could accepted methods. qualification impact Report.

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