Court Opinion

ID: 9450382
Source: CourtListenerOpinion
Date Created: 2023-08-04 16:44:10.581293+00
Date Added: 2024-06-11T17:32:16.692715
License: Public Domain

VAN OOSTERHOUT, Circuit Judge
(dissenting).
Judge Blackmun has fairly stated the facts and has admirably assembled all the background material pertinent to the decision of this case. He has adequately set out the respective contentions of the litigants and the statutes, regulations and decisions bearing upon the issue confronting us.
I agree that the taxpayer’s estimates of cost, useful life and salvage value were reasonable when made. I do not question the finding that the depreciation claim here asserted is based upon well-established and recognized accounting practices. The depreciation claimed and allowed prior to the sale year is entirely proper and is not here attacked.
*644The narrow issue before us is whether it is reasonable to allow a deduction for depreciation in the year in which the depreciating assets are sold when it conclusively appears during the taxable year that the sale price exceeds the adjusted basis at the beginning of the taxable year.
Section 167(a) authorizes a reasonable deduction for depreciation. I agree with Judge Blackmun’s view that the statute and the regulations do not by specific words resolve our problem. As pointed out by the majority opinion, distinguished and able judges have reached opposite results. A decision by the Supreme Court on the issue would appear to be desirable to resolve this controversy.
I disagree with the court’s conclusion that the depreciation claimed for the sale year is reasonable under all the circumstances here existing. “Reasonable” is a flexible word. The reasonableness of the depreciation allowance here claimed is to be determined upon the basis of conditions known to exist at the end of the taxable year for which the return is made. It is not reasonable to say that depreciation is allowable in the sale year when it conclusively appears during such year that the taxpayer has already recovered more than its adjusted basis at the beginning of the year. I do not believe that Congress in providing for reasonable depreciation contemplated that any further depreciation should be allowable in the situation here presented. The overall pattern of the income tax laws is entitled to consideration. The tax consequences of allowing the additional depreciation claimed cannot be ignored in applying a test of reasonableness.
I am in accord with the interpretation made of the depreciation statute and regulations by the separate panels of the Second Circuit in Fribourg Nav. Co. v. Commissioner, 2 Cir., 335 F.2d 15, and United States v. Motorlease Corp., 2 Cir., 334 F.2d 617.
I would reverse upon the basis of the majority opinions in such cases.