Court Opinion

ID: 4630973
Source: CourtListenerOpinion
Date Created: 2020-11-21 03:08:39.020887+00
Date Added: 2024-06-11T07:57:39.168484
License: Public Domain

MINER & FREES LUMBER CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Miner & Frees Lumber Co. v. CommissionerDocket No. 10579.United States Board of Tax Appeals10 B.T.A. 521; 1928 BTA LEXIS 4078; February 6, 1928, Promulgated *4078  1.  Cost and useful life of depreciable assets determined.  2.  Petitioner took an inventory by actual count of items on December 21, 1919.  Some time in March, and before filing its income-tax return for 1919, it ascertained and extended on its books the actual invoice cost of the items counted in December.  Held, that the inventory so taken is the correct closing inventory for the year 1919.  Albert F. Hillix, Esq., for the petitioner.  O. Bennett, Esq., for the respondent.  LANSDON *521  The respondent has determined deficiencies in income and profits taxes for the years 1919 and 1920 in the respective amounts of $6,370.41 and $866.79, and overassessments for the years 1918, 1921, 1922, and 1923, in the respective amounts of $837.44, $711.17, $541.54, and $908.77.  In its petition the taxpayer avers that it is entitled to a refund for the year 1917.  At the hearing the respondent moved to dismiss the proceedings as to the years 1917, 1918, 1921, 1922, and 1923.  For its causes of action as to the years 1919 and 1920 the petitioner alleges (1) that the respondent erroneously increased its closing inventory for 1919; (2) that for each of*4079  such years respondent allowed insufficient depreciation; and (3) that he erroneously reduced its invested capital by the amount of income taxes paid during each year.  FINDINGS OF FACT.  The petitioner is a Missouri corporation, organized in 1917.  In the taxable years it conducted a chain of retail lumberyards at 12 small towns and villages in the northern part of Missouri, and had its principal office at Ridgeway.  At date of incorporation the petitioner acquired a number of retail lumberyards consisting of certain parcels of land and the improvements and buildings thereon at a cost, agreed to by the parties, in the total amount of $68,335.  The segregated cost of the land and depreciable assets owned by the petitioner in the years 1919 and 1920 was as follows: PlaceLandDepreciable assetsBlythedale $500$3,800Ridgeway1,2005,502Bethany2,5002,750New Hampton7503,250Ford City5001,745King City1,0004,340Mound City3,0007,000Coffey $600$4,400Gilman City6003,400Brimson998Spickard3,0004,000Trenton5,5007,000Total19,15049,185*522  The buildings at each place of business consisted*4080  for the most part of sheds of so-called "umbrella" construction.  The upright units rested on bases of stone or concrete.  The roofs were either boards or shingles.  Where there was siding on the buildings, it was of either boards or corrugated iron, but mostly of boards, which for such purposes have longer life than iron siding.  These buildings were kept in good repair by the taxpayer and the cost of such repairs was charged to expense.  The average useful life of the depreciable assets owned by the petitioner in 1919 and 1920 was 20 years.  In December, 1919, the petitioner made a physical inventory of its stock in trade on some basis not clearly disclosed by the evidence, which totaled $237,004.98.  The value of certain trucks in the amount of $5,100 was included in the total which, diminished by such value, was $231,904.98.  In March, 1920, during an audit of the books and business of the petitioner, the counted items of stock in trade in the inventory taken in December, 1919, were revalued at actual invoice cost of such items, which in each instance was lower than market, and the result of such revaluation was $238,613.55, which was the correct total of the closing inventory*4081  for 1919, valued on the basis of cost.  OPINION.  LANSDON: The notice of deficiency makes no reference to the year 1917, and determines overassessments for the years 1918, 1921, 1922, and 1923.  The parties stipulate that the overassessments indicated in the deficiency letter are in each instance based on the assessments in the several income and profits-tax returns made by the petitioner for the respective years.  The Board has no jurisdiction over such years.  . The tax liability of the petitioner for the year 1917 is not before us for redetermination.  From the foregoing, it follows that only the deficiencies for the years 1919 and 1920 are before us for redetermination.  Only questions of fact relating to depreciation and the correct valuation of the petitioner's inventory for 1919 are at issue.  We have found that during the taxable year the petitioner owned depreciable assets of the value of $49,185, and the average useful life of such assets was 20 years.  Deductions from gross income for each of such years on account of depreciation should be recomputed on such basis.  We are convinced that the amount of*4082  $238,613.55 represents the true value of the petitioner's closing inventory for the year 1919, taken on the basis of cost.  The physical count was made in December.  That the actual invoice costs were not extended until some weeks later is not material.  The petitioner's taxable income for the *523  year 1919 should be recomputed on the basis of closing inventory in the amount that we have found.  No evidence was introduced or argument made by the petitioner as to its allegation that invested capital was improperly reduced by the respondent for the years 1919 and 1920 by the amount of income taxes paid in each of such years.  On this issue the determination of the respondent is approved.  Judgment will be entered on 10 days' notice, under Rule 50.