Court Opinion

ID: 4591359
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:05:38.086577+00
Date Added: 2024-06-11T07:50:38.520499
License: Public Domain

BOARDMAN COAL MINING CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Boardman Coal Mining Co. v. CommissionerDocket No. 25614.United States Board of Tax Appeals18 B.T.A. 160; 1929 BTA LEXIS 2112; November 11, 1929, Promulgated 1929 BTA LEXIS 2112">*2112  Allowances made by the respondent for depreciation and depletion, sustained.  A. M. Liveright, Esq., for the petitioner.  Arthur Carnduff, Esq., and S. B. Anderson, Esq., for the respondent.  MARQUETTE 18 B.T.A. 160">*160  This proceeding involves deficiencies in income and profits taxes asserted by the respondent for the years 1918 and 1920 in the amounts of $16,737.11 and $25,359.56, respectively.  The petitioner alleges that its tax liability for the year 1919 is also in controversy.  FINDINGS OF FACT.  The petitioner is a Pennsylvania corporation with its principal office at Clearfield, Pa., and it is and was during the years 1918 to 1920, inclusive, engaged in owning, leasing and operating coal mines.  In the year 1918 the petitioner purchased from the Potts Run Coal Co. certain houses for the use of its employees, for $12,600.  The Potts Run Coal Co. owned a large interest in the petitioner and also owned land adjoining the petitioner's land.  There was no written agreement or deeds relative to the sale of the houses.  They are still in existence and the petitioner is renting them to its employees and receiving rentals therefrom.  They are located1929 BTA LEXIS 2112">*2113  on land belonging to the Potts Run Coal Co.  The amount of $300 was charged off in 1918 as depreciation of said houses.  The petitioner claimed as a deduction from gross income for 1918 the amount $12,680.85, representing the cost of mine equipment and machinery and equipment, and for 1920 it claimed a deduction of $44,943.22 as the cost of mine machinery and equipment.  The respondent allowed deductions for depreciation of said machinery and equipment computed at the rate of 7 1/2 per cent.  18 B.T.A. 160">*161  The total production of the petitioner for the year 1920 was 55,831 tons of coal.  The respondent allowed depletion computed on the basis of 37,359 tons.  In addition to the coal on which depletion was allowed there were 17,309 tons of coal mined from the Chase lease, which the petitioner operated on a royalty basis.  The respondent determined deficiencies for the years 1918 and 1920 and mailed a deficiency letter to the petitioner on January 27, 1927.  The original petition was filed on March 26, 1927, and it states that "The taxes in controversy are income and profits taxes for the years 1918 and 1920." On March 18, 1929, the petitioner filed an amended petition in which it1929 BTA LEXIS 2112">*2114  is stated that the petitioner's tax liability for 1919 is also involved.  OPINION.  MARQUETTE: The petitioner in its amended petition and by counsel at the hearing, alleged that the year 1919 is involved in this proceeding.  The deficiency letter shows that deficiencies have been determined by the respondent only for the years 1918 and 1920, and the Board, therefore, has no jurisdiction of the petitioner's tax liability for 1919 and the amended petition, in so far as it relates to that year, is dismissed.  The petitioner claims the right to deduct from gross income for 1918 the amount of $12,300, representing the depreciated cost of certain miners' houses purchased in that year from the Potts Run Coal Co., and the amount of $11,958.47, representing the cost of mine machinery and equipment, and it also claims that the rate for depletion of its coal properties should be increased.  For the year 1920 the petitioner claims that the respondent erred in disallowing as a deduction for expenses the amount of $41,819.97 representing the cost of mine machinery and equipment purchased in that year; in the rate of depletion allowed, and in failing to allow for depletion on 18,472 net tons1929 BTA LEXIS 2112">*2115  of additional coal.  On the record before us we must affirm the determination of the respondent.  In our opinion the amounts paid for the houses and mine machinery and equipment in question clearly constitute capital expenditures which should be amortized over the life of the assets and recovered through allowances for exhaustion, wear and tear.  The respondent has allowed depreciation for the assets and there is no evidence before us on which we would be warranted in finding that the allowances are not adequate.  Nor is there any evidence to show that the respondent has not allowed an adequate rate of depletion for coal mined.  18 B.T.A. 160">*162  The petitioner claims that it is entitled to depletion on 18,472 tons of coal in addition to the depletion heretofore allowed by the respondent.  At the hearing, however, the petitioner's counsel admitted that 17,309 tons of this additional coal were mined from the Chase lease, on which no depletion is allowable.  As far as the record discloses, the respondent has allowed the petitioner all the depletion to which it is entitled.  Judgment will be entered for the respondent.