Court Opinion

ID: 4603963
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:33:09.804753+00
Date Added: 2024-06-11T07:52:56.007220
License: Public Domain

APPEAL OF EXCELSIOR LAUNDRY CO.Excelsior Laundry Co. v. CommissionerDocket No. 158.United States Board of Tax Appeals3 B.T.A. 1303; 1926 BTA LEXIS 2432; April 19, 1926, Decided Submitted September 1, 1925.  *2432  The evidence herein held insufficient to establish the rates and basis for depreciation claimed by the taxpayer.  C. H. Pease, C.P.A., for the taxpayer.  B. H. Saunders, Esq., for the Commissioner.  LOVE *1303  Before MARQUETTE, MORRIS, GREEN, and LOVE.  This appeal is from the determination of a deficiency in income and profits tax for the years 1920 and 1921, in the aggregate sum *1304  of $5,913.73.  The deficiency arose from the action of the Commissioner in increasing the rate of depreciation taken by the taxpayer for the period prior to the taxable years, resulting in a decrease of invested capital for the taxable years in question.  FINDINGS OF FACT.  The taxpayer is an Illinois corporation with its principal place of business at Chicago.  It was engaged in the business of operating a large laundry and had been so engaged for over thirty years.  Its assets consisted of the usual plant and equipment of a large modern laundry, all of which was kept in good repair.  A summarized inventory of the assets as of December 31, 1912, as shown upon the books of the taxpayer, is as follows: Power machinery$3,198.75Depreciated200.00$2,998.75Machinery, wash room, first floor7,622.05Depreciated200.007,422.05Machinery, second floor4,564.06Depreciated200.004,364.06Machinery, third floor6,066.63Depreciated200.005,866.63Ventilating system355.75Shafting and pulley977.50Belting642.7122,627.45Baskets and wooden trucks862.39Less 25 per cent215.60646.79Boiler-room tools, etc44.60Carpenter tools6.75Engineers' tools, etc243.55Ironing room spec273.41Less41.01232.40Wash-room furniture377.00Steam-heating system2,811.90Depreciation100.002,711.90Water system3,107.06Depreciation100.003,007.06Gas system700.09Carpentry, lumber, etc1,918.35Main office and laundry furnishings2,296.26Less 15 per cent344.391,951.87Insurance account818.05Signs261.35Gold and white letters$52.20Books, stationery, etc630.90Engineers' supplies162.43Horses2,785.00Barn supplies481.73Wagons$2,718.50Harness318.00Miscellaneous supplies (itemized inventory)811.603,848.1043,507.68*2433 *1305  The principal assets had been acquired a number of years prior to the date of the above inventory, but were carried at cost.  Some of the assets, as indicated in the above inventory, were depreciated to some extent on December 31, 1912.  The taxpayer identified one certain flat-work ironer, the original cost of which in 1904 was $2,600 and was carried on the said 1912 inventory at $2,340, which ironer was turned in on a new ironer at a valuation of $2,000 after 22 years' service.  One certain collar ironer and a metal washer had a life of 25 years.  Certain shirt ironers, after 21, years' usage, were still in service.  Some of the office furniture and fixtures had been in service 30 years and were still in use.  The usual life of its Ford trucks was four years, but four of them were still in use after a four-year usage.  One G.M.C. truck purchased in 1916 was still in operation.  Some of the wagons and horses had lasted 12 to 15 years.  There was no evidence of the life of the remaining assets.  The taxpayer claims that the 1912 list of values should be accepted as the March 1, 1913, value upon which depreciation should be based, and depreciation taken down to 1920*2434  at the following rates: Per cent.Laundry machinery and equipment6 2/3Power equipment5Furniture and fixtures5Automobile and delivery equipment20For the taxable years, the taxpayer claims depreciation at the following rates: 19201921Power machinery1411Laundry machinery109Delivery equipment2714Office equipment1010The Commissioner allowed depreciation for the taxable years, as well as prior years, as follows: Per cent.Laundry machinery, including power equipment10Furniture and fixtures10Horses, wagons, and harness15Automobiles25*1306  OPINION.  LOVE: In this appeal the taxpayer seeks a low rate of depreciation for the period prior to the taxable years 1920 and 1921, while for these latter years it claimed in its tax returns a much higher rate.  The evidence is insufficient to establish the rates or the basis of depreciation claimed by the taxpayer.  Although the taxpayer was able to prove that a few of its machines had a longer life than that attributed to them by the Commissioner, there is a total failure of proof as to the remainder of the machinery and*2435  other assets.  Furthermore, the testimony is strikingly inconsistent with the rates of depreciation claimed by the taxpayer for the same class of assets in the years 1920 and 1921.  The deficiencies are $2,559.43 for 1920 and $3,354.30 for 1921.  Order will be entered accordingly.