Court Opinion

ID: 4606880
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:39:29.956951+00
Date Added: 2024-06-11T07:53:27.013894
License: Public Domain

HOME NEWS PUBLISHING CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Home News Publishing Co. v. CommissionerDocket No. 22474.United States Board of Tax Appeals18 B.T.A. 1008; 1930 BTA LEXIS 2547; February 3, 1930, Promulgated *2547  Expenditures made by the petitioner for replacing wooden girders with steel girders and replacing old floors with new, old front of building with a new front and for putting a window in a wall where none had been before, held to be capital expenditures and not deductible in determining taxable net income.  W. Morton Carden, Esq., for the petitioner.  D. A. Taylor, Esq., and J. M. Morawski, Esq., for the respondent.  TRAMMELL*1008  This proceeding is for the redetermination of a deficiency in income and profits tax of $2,339.65 for 1921.  The only matter put in controversy by the petition is the correctness of the respondent's action in disallowing $7,404.63 of an amount of $11,170.22 taken by the petitioner as a deduction in its return for repairs made to three buildings, two of which were owned by the petitioner and the other being occupied by the petitioner as lessee.  At the hearing the petitioner conceded that of the $7,404.63 disallowed the amount of $2,168.81 was properly disallowed.  There is, therefore, in controversy now only the amount of $5,235.82 representing expenditures made for work done on one of the buildings owned by*2548  the petitioner.  FINDINGS OF FACT.  The petitioner, a New Jersey corporation, organized in 1908 and having its principal office at New Brunswick, is engaged in the business of publishing a daily newspaper.  The petitioner was during 1921, and still is, the owner of a brick building known as No. 127 Church Street, New Brunswick, N.J.  This building, which consists of three stories and basement, was acquired by the petitioner in 1908.  The front half of the building was constructed first and is quite old.  The rear half was constructed later and is about 30 years old.  About 1905 and prior to the time the building was acquired by the petitioner the second and third floors in the rear half collapsed from being overloaded.  In temporarily restoring the damaged floors wooden beams or sills were installed as girders to support them.  The wooden beams or sills remained in the building until 1921.  From the time the petitioner acquired the building in 1908 to 1921 it was never unoccupied, but was rented to tenants.  Of the tenants, one used it for a garage.  Another tenant used it for a cutglass factory.  Each of the tenants had an office in the building during the period of his occupancy. *2549  After inspecting the building about the first part of 1921 the building inspector for the City of New Brunswick objected to its *1009  being occupied in the condition it was at that time.  He had previously made objections to the condition of the building.  He considered it was unsafe and wanted it made into a better structure than it was.  He considered the wooden girders then supporting the second and third floors of the rear half of the building as unsafe and required that they be replaced with steel girders in order to make the building safe for occupancy.  The petitioner employed an architect to make designs for and supervise the replacement of the girders and other work that was done on the building.  A steel structural engineer and contractor was engaged to install the steel girders.  He installed them for the second and third floors of the rear half of the building and got the building ready for the reception of the wood floor joists on these steel girders.  These girders were to support the floors and whatever was placed on them and were not needed to support any of the walls of the building.  For this work the petitioner paid in 1921 the amount of $1,550.26.  *2550  In connection with the replacement of the wooden girders certain carpenter work was necessary.  A carpenter and contractor was engaged to do the work.  In addition to this work this contractor also did other carpenter work on the front half of the building.  This latter work consisted of installing a new glass front to the first floor of the building, laying floors in the front part of the building and repairing the walls, partitions and ceilings.  A window was inserted in one of the walls where one had not been before, but the front was similar to the one that was there previously.  With the exception of inserting the window, all of the work done on the front part of the building was necessary because of the ordinary wear and tear during its long life of perhaps fifty years, plus the damage resulting from its having been used as a garage.  The building had not been repaired for several years.  For the materials furnished by the carpenter contractor and the work performed the petitioner paid during 1921 the amount of $3,685.56.  The wooden beams or girders that were removed had a useful life of 30 years, under the conditions to which they were subjected.  The steel girders that*2551  were installed had an estimated useful life of 40 years.  Irrespective of whether wooden girders were reinstalled or steel girders installed as was done, the materials furnished and the work done would have been necessary.  If ordinary repairs had been made each year, a large part of the expenditures made in 1921, except for putting in the window, would have been avoided.  As a result of the work done by the structural engineer and the carpenter, no floor space was added to the building nor was there a new roof put on.  The new girders, new floors, new *1010  front and additional window placed in the building in 1921 are still in use and are in good condition.  The work done on the building served to prolong its life and put it in condition for use by the petitioner for its publishing business.  After the work on the building had been completed the petitioner in 1921 moved its office into the building and in the following year the work of building platforms for the petitioner's printing presses was done.  The petitioner kept its books on the cash receipts and disbursements basis.  OPINION.  TRAMMELL: The petitioner contends that the amount of $1,550.26 paid to the structural*2552  engineer and the amount of $3,685.56 paid to the carpenter contractor do not constitute capital expenditures but were repairs and as such are allowable deductions.  The question presented is one of fact.  If the expenditures were for replacements, alterations, improvements and additions they must be capitalized.  ; . The evidence shows that all the work for which the expenditures were made was pursuant to a general plan of reconditioning and improving and altering the property as a whole to make it suitable for the petitioner's purposes.  As such we think the expenditures were of a capital nature and not deductible as expense.  See ;; . While certain portions of the work done may, standing alone, have properly been classified as repairs, all the work was a part of the same general scheme, and we do not believe under the facts that certain particular items should be separated and classified as repairs.  *2553 . Judgment will be entered for the respondent.