Court Opinion

ID: 4612973
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:52:24.341187+00
Date Added: 2024-06-11T07:54:31.948039
License: Public Domain

APPEAL OF MERKLE BROOM CO.Merkle Broom Co. v. CommissionerDocket No. 4953.United States Board of Tax Appeals3 B.T.A. 1084; 1926 BTA LEXIS 2479; March 31, 1926, Decided Submitted November 15, 1925.  1926 BTA LEXIS 2479">*2479 John F. McCarren, Esq., for the taxpayer.  Ellis W. Manning, Esq., for the Commissioner.  3 B.T.A. 1084">*1084  Before SMITH, JAMES, LITTLETON, and TRUSSELL.  The taxpayer appeals from the determination of a deficiency in income and profits tax for the years 1918 and 1919 in the aggregate amount of $4,147.62.  The question in issue is proper depreciation rates upon (1) buildings, (2) machinery and equipment, and (3) automobiles for the tax years 1918 and 1919.  3 B.T.A. 1084">*1085  FINDINGS OF FACT.  The taxpayer was incorporated in 1892 under the laws of Illinois, and is engaged in the manufacture of brooms from broom corn.  In its original return for 1917 the taxpayer deducted from gross income $2,451.15 for depreciation, which was approximately 3 per cent of its plant account, which account was not segregated on its books into (1) buildings, and (2) machinery and equipment.  No claim for depreciation was made in its return for 1918.  In its return for 1919 it deducted depreciation at the rate of 5 per cent on its plant account, and at the rate of 33 1/3 per cent on automobiles.  In its return for 1920 depreciation was claimed at the rate of 3 per cent on the plant account1926 BTA LEXIS 2479">*2480  and nothing on automobiles.  The Commissioner has determined proper rates of depreciation for the years 1918 and 1919 to be as follows: Per cent.Buildings3Machinery and equipment5Automobiles20A proper segregation of the plant account as between buildings, on the one hand, and machinery and equipment, on the other, is 54.7 per cent of the total for buildings and 45.3 per cent of the total for machinery and equipment.  The taxpayer's main building is 200 feet long by 200 feet wide; it has two stories and a basement.  The first building erected was 40 feet wide by 100 feet long, three stories high; the buildings were destroyed by fire around 1900.  The present buildings are all of brick construction and are kept in a fair state of repair.  In the manufacture of brooms the taxpayer uses many kinds of machinery, such as a sizing machine, which sorts the corn into various lengths; a bumping machine, which makes the corn stop at the proper length; a corn-cutting machine, which cuts off the fibers; a cutting machine, which separates the fiber as it is grown on the corn; a heading machine, which takes the seeds off the corn, known as a reel by the farmers; 1926 BTA LEXIS 2479">*2481  a tying machine, by which the brooms are tied with wire; a clipping machine, which clips off the ends of the brooms; a hand-polishing machine, and many others.  Some of the machines vibrate excessively when in use.  The degree of vibration varies with the different machines.  The average life of all the different machines of the taxpayer is from 5 to 10 years.  Some of the machines may last more than 10 years and some less than 5 years.  The taxpayer uses in its business automobiles, such as Dodges, Hupmobiles, Buicks, and Fords.  These are used by salesmen in traveling throughout the country.  As a rule, automobiles are exchanged for new ones at the end of the second year.  3 B.T.A. 1084">*1086  Proper rates of depreciation for the years 1918 and 1919 are: Per cent.Buildings3Machinery and equipment10Automobiles25Order of redetermination will be entered on 10 days' notice, under Rule 50.