Court Opinion

ID: 4472364
Source: CourtListenerOpinion
Date Created: 2020-01-13 23:23:55.406334+00
Date Added: 2024-06-11T15:03:23.848186
License: Public Domain

Halpern, J., dissenting: I agree with Chief Judge Hamblen, and I have joined his dissent. I have set forth my own views on the law here involved in Liddle v. Commissioner, 103 T.C. 285, 301 (1994) (Halpern, J., dissenting). Briefly stated, I believe that, to claim recovery property within the meaning of section 168(c)(1), petitioners would have to show not only that the bows here in question are subject to wear and tear but also that they have determinable useful lives (i.e., useful lives capable of being settled, fixed, or determined). I do not believe that they have done so. I write separately, however, only to address the suggestion of allocation raised by Judge Gerber. Judge Gerber suggests that the bows are dual use property, having utility both as playables and as collectibles. Judge Gerber recognizes that the utility of the bows as collectibles will not be exhausted in any fixed or determinable period. He assumes that their utility as playables will be exhausted in a fixed period, which can be shown. Judge Gerber would allow a deduction under section 168 with respect to a taxpayer’s basis in such dual use property properly allocated to the property’s utility as a playable. To be sure, section 1.167(a)-2, Income Tax Regs., provides: The depreciation allowance in the case of tangible property applies only to that part of the property which is subject to wear and tear, to decay or decline from natural causes, to exhaustion, and to obsolescence. * * * See sec. 1.168-2(d)(2)(ii), Proposed Income Tax Regs., 49 Fed. Reg. 5945 (Feb. 16, 1984) (similar). We have allowed less than a full allowance for the exhaustion, wear and tear, and obsolescence of property where only a portion of the property was used in a trade or business or held for the production of income. See, e.g., International Artists, Ltd. v. Commissioner, 55 T.C. 94 (1970) (depreciation deduction allowed to the extent premises were used for business purposes and disallowed to the extent used for personal purposes); Noyce v. Commissioner, 97 T.C. 670 (1991) (similar allocation under ACRS, with respect to an airplane). It seems to me a different thing, however, to say that property can wear out for one purpose but not another, so that, in effect, we should treat the taxpayer as having purchased two pieces of property rather than one. We have characterized as “bizarre” the suggestion that the owner’s life expectancy should determine the depreciable useful life of an asset whose inherent value does not terminate upon the owner’s death. Clinger v. Commissioner, T.C. Memo. 1990-459 (quoting Coussement v. Commissioner, T.C. Memo. 1966-179, affd. 391 F.2d 227 (6th Cir. 1968)). Judge Gerber would allow petitioners to carve out of the apparently indeterminable useful lives of the bows as a whole those particular lives that petitioners may (but did not) show to be limited, and get a depreciation deduction for the utility related to those lives. We do not, in general, allow the fee owner of land to fragment the varied utilities inherent in her ownership in order separately to depreciate those with a determinable useful life. I do not see why we should do so with respect to otherwise nondepreciable property, such as the bows. Hamblen, Jacobs, and Whalen, JJ., agree with this dissent.