Court Opinion

ID: 4625553
Source: CourtListenerOpinion
Date Created: 2020-11-21 02:57:25.353803+00
Date Added: 2024-06-11T07:56:43.428155
License: Public Domain

Carola Hunter v. Commissioner. Robert Hunter v. Commissioner.Hunter v. CommissionerDocket Nos. 111501, 111502.United States Tax Court1943 Tax Ct. Memo LEXIS 183; 2 T.C.M. (CCH) 502; T.C.M. (RIA) 43351; July 24, 1943*183  G. F. Hammond, Esq., for the petitioners. Lawrence R. Bloomenthal, Esq., for the respondent.  STERNHAGEN Memorandum Findings of Fact and Opinion The Commissioner determined deficiencies in income tax for 1940 of $1,052.05 in Docket No. 111501, and $1,713.70 in Docket No. 111502. The only question is whether $6,209.81 spent in 1940 was for repairs and maintenance, and deductible as contended by the petitioners, or for permanent improvements and betterments, as determined by the respondent. Findings of Fact The petitioners, as partners, operated a farm of about 137 acres about fifteen miles from Youngstown, Ohio. Robert Hunter is president of Hunter Construction Company, of Youngstown, Ohio, engaged in the construction business. The farm was bought by petitioner July 1, 1940, from one who had lived on it and operated it and agreed to continue. In September, 1940, he left the farm and a new tenant moved in. The buildings on the farm, including a farmhouse, chicken coop, pigpen, sheep shed and dairy barn, were in bad condition, and the new tenant refused to move in until the place was thoroughly renovated. The farmhouse was over 155 years old. Walls were removed and others built *184  in to enlarge the second floor. It was painted and redecorated. New concrete floors were laid in the chicken coop and pigpen and a concrete side wall was constructed in the chicken coop. Rotted or decayed boards were removed from all the buildings and replaced with new lumber. All the buildings, which appeared never to have been painted, were painted as were also farm machinery and equipment. The buildings had been equipped with electric lights but the installation had never been inspected and was reconditioned to meet the approval of county inspectors. Gutters, downspouts and roof slate were replaced. In 1940, $743.49 was spent for dynamite, caps and fuses, to remove stumps and rocks to enlarge the fields. Buildings were damaged, consisting mostly of broken windows and sash, and petitioners paid $55.65 to repair the damage. A creek which ran through the farm had formed an elbow extending toward the barnyard. This threatened erosion and serious damage. To prevent further damage, the elbow was removed by restoring the original bed of the creek. This was done at a cost of $1,313.94. To prevent erosion on other parts of the farm 2,063 lineal feet of trenches were dug in which drain *185  file were laid at a cost of $337.90. The following shows amounts spent for reconditioning the farm and buildings: Dynamite, fuses and caps$ 743.49Repair damage to windows and sashcaused by dynamiting55.65Sand, gravel and cement, rental ofconcrete mixer and operator, loanof two men to mix concrete, haul-ing timber to raise chicken coopand pigpen, all to lay concretefloor in coop and pen and con-struct two-foot wall in chickencoop518.56Lumber, nails and other suppliesfor chicken coop and pigpen176.65Lumber. nails and other supplies torecondition sheep shed135.92Paint, turpentine, brushes and othersupplies for painting outside offarmhouse and other buildings andequipment and machinery537.84To tinsmith, labor and supplies tocorrect bad gutter condition, down-spouts, replace slate fallen out onroofs132.67Papering and painting inside offarmhouse215.92Gravel, cement, lime, concrete blocksused to recondition main dairy barn153.14Lumber, other supplies, and labor, torecondition all buildings, but mostlyfor farmhouse, including $5 formixer for sidewalks956.97Electrical supplies to correct electricinstallation in chicken coop, pigpenand farmhouse62.09Digging 2,063 feet of trenches anddrain tile337.90Relocation of creek bed1,313.94Sewer, tile, etc.17.93Sheets of heater tin, etc.4.08Miscellaneous items purchased fromJuly 22 to September 27, 1940329.72Total$5,692.47*186  The following amounts were paid in 1940 for gasoline used in the operation of machinery on the farm, replacement of broken glass, and incidentals, such as lime, valves and bushings, and whitewash: 90 gallons of gasoline$ 12.15Two lights of glass to replace brokenwindows4.29Lime, valves and bushings, white-wash4.12Total$ 20.56The petitioners concede that the following items were not for repairs: Electric switch, bathroom set, chickentrough, sash cord, drain stoppers,etc.$ 8.16Medicine cabinet for farmhouse5.14Outside flxtures and bath fixtures11.574,500 feet of 2 x 6, nails and putty(Petitioner unable to state wherethese supplies were used)286.91Lime sewer95.00Saddle, bridle, blanket and othermiscellaneous items30.00Two pairs housings for harness60.00Total$ 496.78Opinion STERNHAGEN, Judge: With the exception of the $20.56 paid for gasoline, glass, lime, whitewash, valves and bushings, the evidence shows that the expenditures made by the petitioners were for the purpose of improving and reconditioning the farm, not as an incident of current operation, - an ordinary and necessary expense of carrying on business, - but of*187  putting it in shape and condition for permanent or indefinite operation; and this upon the assumption that it was to be operated as a business. Such expenditures are not deductible as expenses of operation but are added to the cost of the investment, to be recovered either through sale or depreciation throughout the life of the investment. See I. M. Cowell, 18 B.T.A. 997">18 B.T.A. 997,; Mertens, Law of Federal Income Taxation, § 25.30. Only the $20.56 is properly deductible; the deduction of the rest was properly disallowed. Decision will be entered under Rule 50.