Court Opinion

ID: 4608998
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:43:48.583244+00
Date Added: 2024-06-11T07:53:47.950879
License: Public Domain

KNOXVILLE BRICK CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Knoxville Brick Co. v. CommissionerDocket No. 8844.United States Board of Tax Appeals12 B.T.A. 431; 1928 BTA LEXIS 3544; June 6, 1928, Promulgated *3544  Rate at which depreciation should be computed on assets considered as a group determined.  Jasper H. Armstrong, Esq., for the petitioner.  Leroy L. Hight, Esq., for the respondent.  TRAMMELL*431  This proceeding is for the redetermination of deficiencies in income and profits taxes of $781.66 and $499.35 for 1920 and 1921, respectively.  The only matter raised by the petition and not abandoned at the hearing is the rate at which depreciation should be computed on the petitioner's "Construction Account." FINDINGS OF FACT.  The petitioner is the owner of a brick-making plant, located in Knox County, Tennessee.  During the years 1911 and 1912, and again beginning in 1921 and continuing into 1923, the petitioner completely rebuilt its plant.  During the years involved in this proceeding and since 1911 the petitioner has carried on its books in one account known as the "Construction Account" its buildings, brick kilns, brick drier, drier cars and other brick machinery, including boilers for generating steam.  The buildings consisted of sheds over the kilns, drier and boilers.  The sheds over the kilns and drier are supported by poles, one end*3545  of which is placed in the ground.  On the other end of the poles are placed rafters to which sheathing is attached.  The sheathing is covered by roll or paper roofing, which lasts about five years if a roof paint is used.  With the exception of the paper roofing, these sheds are of wood construction.  The drier shed has removable sides which are used in the winter for keeping out the water.  The shed over the boilers has a brick foundation and the remainder of it is of frame *432  construction except the roof, which is of metal.  This roof lasts from 10 to 12 years.  The brick kiln is a patented kiln, known as the Yongern kiln, and was constructed new in 1912.  This kiln, consisting of 15 chambers, gave considerable trouble when first put in and the petitioner did not get to use it much during the first two years after it was put in.  In 1921 five of the chambers had to be torn out and rebuilt.  Whith considerable repairs, the useful life of this kiln was 10 years.  The drier was constructed of brick and contained 16 tunnels, lined with fire brick.  This building was constructed in 1912, and in 1922 eight of the tunnels were rebuilt.  The drier cars used for taking brick*3546  from the machinery where they were made into the drying house, are subjected to high temperatures in the drier and require constant repair.  Their useful life is less than 10 years.  The tracks over which the drier cars operate were also carried in the "Construction Account." The brick machine for molding brick, and made of steel and cast iron, was put in new in 1912.  The operating life of this machine, which was discarded and replaced by a new one in 1922, was 10 years.  The cutting table, used for cutting the brick at proper dimensions, wears out rapidly and can not be satisfactorily repaired.  About 1918, the petitioner began using some secondhand drying pans which had previously been in use for about eight months.  Drying pans are used for pulverizing rock and slate fine enough for making brick.  The petitioner replaced these pans at the end of 1921 with new pans.  Drying pans, on account of being the largest machines about a brick plant and having the heaviest duties, are subject to great wear and tear.  Since 1912 the petitioner has had three pug mills which are machines for cutting and mixing clay.  These machines are subjected to haavy wear.  The petitioners also owned*3547  feeders, which are box-like machines, into which the dirt from the car is dumped and by which it is carried or fed into the pug mill.  The useful life of this machine is about 10 years.  Prior to the time the petitioner rebuilt its plant in 1912 it owned boilers used for generating steam.  From 1912 until 1923 these boilers were capable of carrying the complete load of the plant operating at full capacity.  While these boilers are still in use, they have not been capable of being loaded to capacity since 1923, when the inspector cut down on the steam pressure that is permissible.  In the determination of the deficiencies herein involved, the respondent computed depreciation at the rate of 7 1/2 per cent on the petitioner's "Construction Account." *433  OPINION.  TRAMMELL: The only issue involved in this proceeding is the rate at which depreciation should be computed on the petitioner's assets as carried in the "Construction Account" and considered as a group.  We think, from a consideration of all the evidence, that 10 per cent is a fair and reasonable rate of depreciation on the assets of the petitioner, considered as a group.  Judgment will be entered under Rule*3548  50.