Court Opinion

ID: 4622352
Source: CourtListenerOpinion
Date Created: 2020-11-21 02:49:13.727399+00
Date Added: 2024-06-11T07:56:10.522679
License: Public Domain

UNITED MARKETS, INC., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.United Markets, Inc. v. CommissionerDocket No. 11489.United States Board of Tax Appeals10 B.T.A. 372; 1928 BTA LEXIS 4128; January 28, 1928, promulgated *4128  1.  The evidence is insufficient to show that petitioner is entitled to a greater allowance for exhaustion, wear and tear than was allowed by the Commissioner.  2.  The provisions of section 331 of the Revenue Acts of 1918 and 1921 are applicable to leases acquired by the petitioner in 1920 for stock from a predecessor partnership and the Commissioner correctly held that the petitioner might not include such leases in invested capital at an amount in excess of the cost thereof to the predecessor owner.  Fred VanDolsen, Esq., for the petitioner.  A. H. Murray, Esq., and Benton Baker, Esq., fot the respondent.  LITTLETON*372  The Commissioner determined a deficiency of $1,659.76 for the period March 6 to December 31, 1920, and a deficiency of $3,296.50 for the calendar year 1921.  It is claimed that the Commissioner erred in refusing to allow a cash value of $5,466.50 for leases acquired in 1920 for stock for the purposes of invested capital and exhaustion, and in not allowing adequate deductions for exhaustion, wear and tear of furniture, fixtures, and equipment.  FINDINGS OF FACT.  Petitioner is a Florida corporation operating a chain*4129  of stores for the sale of meat and groceries at retail at Tampa.  It was organized March 6, 1920, succeeding a partnership engaged in the same business, and in exchange for the assets of the partnership, which included several leases for varying terms on buildings used in the business, petitioner issued to the partners its capital stock.  Soon after its organization and during the taxable years petitioner made *373  many changes in the arrangement of its stores and made considerable additions and improvements.  It removed and replaced certain shelving and other equipment, changed store fronts, rearranged entrances, rearranged and acquired new counters and show cases, and constructed new refrigerators.  Considerable used furnishings and equipment were acquired by the petitioner from the partnership for stock.  Petitioner frequently rearranged its stores and replaced certain equipment.  For the period March 6 to December 31, 1920, the Commissioner reduced the deduction claimed by the petitioner for exhaustion, wear and tear of property in the amount of $2,762.90 and disallowed a deduction of $2,615.25, representing the cost of furniture and fixtures and $1,658.27 representing*4130  the cost of additions and betterments.  The Commissioner included these amounts in the capital account and allowed depreciation thereon.  For the year 1921 the Commissioner reduced the deduction claimed for depreciation of property in the amount of $5,279.73 and disallowed a loss of $2,590.43 on furniture and fixtures.  The Commissioner declined to allow petitioner a value of $5,466.50 for leases, acquired from the predecessor partnership for stock, for invested capital purposes, for the reason that under section 331 of the Revenue Acts of 1918 and 1921 a corporation was limited to the investment in these leases by the partners.  The corporation claimed a deduction in its return for exhaustion of leases and there is insufficient evidence in the record to show that the Commissioner did not make an adequate allowance in this regard.  OPINION.  LITTLETON: The evidence submitted in this proceeding is not sufficient to warrant the Board in disturbing the Commissioner's determination in regard to the allowance for exhaustion, wear and tear of furniture, fixtures and equipment or as to the disallowance of the loss on furniture and fixtures.  Considerable testimony was introduced by depositions*4131  but this testimony was so general that it is impossible to determine therefrom the value of the property acquired for stock from the partnership, the cost of equipment subsequently acquired or its useful life.  It appears that much of the furniture, fixtures and equipment was torn our, replaced or discarded prior to the end of the useful life thereof and the evidence is not sufficient to enable the Board to determine the loss, if any, to which the petitioner is entitled on this account.  The leases in question were acquired by the partnership without cost and some time prior to the organization of the petitioner.  It is claimed that when these leases were paid in to the petitioner by the *374  partners for stock they had an actual cash value of $5,466.50.  The Commissioner correctly excluded this amount from invested capital for the taxable years under the provisions of section 331 of the Revenue Acts of 1918 and 1921.  The evidence does not show what value, if any, the Commissioner determined for the leases for depreciation purposes or what portion, if any, he disallowed of the deduction claimed for exhaustion of these leases.  Judgment will be entered for the respondent.*4132