Court Opinion

ID: 9425789
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:15:50.628501+00
Date Added: 2024-06-11T17:22:57.578135
License: Public Domain

Mr. Justice Douglas,
dissenting.
This Court has, to many, seemed particularly ill-equipped to resolve income tax disputes between the Commissioner and the taxpayers. The reasons are (1) that the field has become increasingly technical and complicated due to the expansions of the Code and the proliferation of decisions, and (2) that we seldom see enough of them to develop any expertise in the area. Indeed, we are called upon mostly to resolve conflicts between the circuits which more providently should go to the standing committee of the Congress for resolution.
That was the sentiment behind Dobson v. Commissioner, 320 U. S. 489, written by Mr. Justice Jackson and enthusiastically promoted by Mr. Justice Black, Mr. Justice Frankfurter, and myself. Dobson, save for egregious error and constitutional questions, would have left picayune cases such as the present one largely to the Tax Court, whose expertise is well recognized. But Dobson was short-lived, as Congress made clear its purpose that we were to continue on our leaden-footed pursuit of law and justice in this field. Internal Revenue Code of 1939, § 1141, as amended, 62 Stat. 991.
*20Now that we are on our own I disagree with the Court in disallowing the present claim for depreciation. A company truck has, let us say, a life of 10 years. If it cost $10,000, one would expect that “a reasonable allowance for the exhaustion, wear and tear” of the truck would be $1,000 a year within the meaning of 26 U. S. C. § 167 (a). That was the provision in the House Report of the 1954 Code when it said that it provided for “a liberalization of depreciation with respect to both the estimate of useful life of property and the method of allocating the depreciable cost over the years of service.”1 H. R. Rep. No. 1337, 83d Cong., 2d Sess., 22.
Not so, says the Government. Since the truck was used to build a plant for the taxpayer and the plant *21has a useful life of 40 years, a lower rate of depreciation must be used — a rate that would spread out the life of the truck for 40 years even though it would not last more than 10. Section 167 (a) provides for a depreciation deduction with respect to property “used in the (taxpayer’s) trade or business” or “held for the production of income” by the taxpayer. There is no intimation that § 167 (a) is not satisfied. The argument is rested upon § 161 which allows the deductions specified in § 167 (a) “subject to the exceptions” in § 263 (a) which provides:
“No deduction shall be allowed for—
“(1) Any amount paid out for new buildings or for permanent improvements or for betterments made to increase the value of any property or estate . . .
I agree with the Court of Appeals that depreciation claimed on a truck whose useful life is 10 years is not an amount “paid out” within the meaning of § 263 (a) (1). If “payment” in the setting of § 263 (a)(1) is to be read as including depreciation, Congress — not the courts — ■ should make the decision.
I suspect that if the life of the vehicle were 40 years and the life of the building were 10 years the Internal Revenue Service would be here arguing persuasively that depreciation of the vehicle should be taken over a 40-year period. That is not to impugn the integrity of the IRS. It is only an illustration of the capricious character of how law is construed to get from the taxpayer the greatest possible return that is permissible under the Code.
The opinion of the Court of Appeals written by Judge Trask and concurred in by Judges Choy and McGovern, states my view of the law.
Depreciation on an automobile is not allowed as a charitable deduction, Orr v. United States, 343 F. 2d 553; Mitchell v. Commissioner, 42 T. C. 953, 973-974, *22since it is not a “payment” within the meaning of §170(a)(l). Likewise depreciation on an automobile used to transport the taxpayer’s son to a doctor is not deductible as a medical expense under § 213 because it is not an expense “paid” within the meaning of the section. Gordon v. Commissioner, 37 T. C. 986; Calafut v. Commissioner, 23 T. C. M. 1431.2
The IRS, however, has ruled that depreciation on construction equipment owned by a taxpayer and used in its construction work must be capitalized.3 That Revenue Ruling, as the Court of Appeals held, is a legal opinion within the agency, not a Regulation or Treasury decision. It is without force when it conflicts with an Act of Congress.4 See Bartels v. Birmingham, 332 U. S. 126, 132.
*23If the test under § 263 (a)(1) were the cost of capital improvements, the result would be different. But, as noted, the test is “any amount paid out,” which certainly does not describe depreciation deductions unless words are to acquire esoteric meanings merely to accommodate the IRS. Congress is the lawmaker; and taking the law from it, we should affirm the Court of Appeals.

The Committee indicated that "reasonable” depreciation allowances include the straight-line method, the declining-balance method, or any other method that on an annual basis does not exceed the allowances on the declining-balance method. H. R. Rep. No. 1337, 83d Cong., 2d Sess., 22-23.
The purpose of providing more liberal depreciation allowances was explicitly stated:
“More liberal depreciation allowances are anticipated to have far-reaching economic effects. The incentives resulting from the changes are well timed to help maintain the present high level of investment in plant and equipment. The acceleration in the speed of the tax-free recovery of costs is of critical importance in the decision of management to incur risk. The faster tax writeoff would increase available working capital and materially aid growing businesses in the financing of their expansion. For all segments of the American economy, liberalized depreciation policies should assist modernization and expansion of industrial capacity, with resulting economic growth, increased production, and a higher standard of living.
“Small business and farmers particularly have a vital stake in a more liberal and constructive depreciation policy. They are especially dependent on their current earnings or short-term Ic-ans to obtain funds for expansion. The faster recovery of capital investment provided by this bill will permit them to secure short-term loans which would otherwise not be available.” Id., at 24.

 Where Congress has intended that depreciation be treated as an expenditure it has stated so explicitly, e. g., § 615 (a) of the Internal Revenue Code.

 “[Departmental rulings not promulgated by the Secretary are of little aid in interpreting a tax statute . . . ,” Biddle v. Commissioner, 302 U. S. 573, 582. Indeed, each issue of the Internal Revenue Bulletin warns that “Revenue Rulings . . . reported in the Bulletin do not have the force and effect of Treasury Department Regulations .. ..”