Court Opinion

ID: 4623594
Source: CourtListenerOpinion
Date Created: 2020-11-21 02:53:21.252501+00
Date Added: 2024-06-11T07:56:23.445941
License: Public Domain

JOHN M. STEVERSON, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Steverson v. CommissionerDocket No. 33351.United States Board of Tax Appeals22 B.T.A. 485; 1931 BTA LEXIS 2118; February 28, 1931, Promulgated *2118  The amount of allowable deduction on account of a fire loss determined.  William S. Pritchard Esq., for the petitioner.  L. W. Creason, Esq., for the respondent.  TRAMMELL*485  This is a proceeding for the redetermination of a deficiency in income tax for the calendar year 1923 in the amount of $1,928.64.  At the hearing the parties stipulated that the petitioner received a salary of $2,500 instead of $5,000 as claimed in the deficiency notice.  The petitioner also withdrew an issue with respect to depreciation, leaving as the only question to be decided the amount of any deductible loss with respect to a fire.  FINDINGS OF FACT.  The petitioner is an individual residing at Birmingham, Ala.  In 1923 the petitioner was the owner of a sawmill known as the Hillabee Mill, located about 2 1/2 miles from Hillabee, Ala.  On the first of June, 1923, this mill was completely destroyed by fire.  At the time of this destruction it had been built about two years.  Properties destroyed consisted of two boilers, a Wheelin No. 5 mill, an Atlas engine, a Moore dry kiln, a lumber shed, a barn in which was kept feed, tools and harness, an edger, belts and pulleys, *2119  nine saws, about 15,000 to 20,000 feet of logs, about 30,000 feet of lumber in the dry kiln, and about 34,000 feet of other lumber.  *486  The two boilers cost $100 and $700 each, respectively.  They had an ordinary life of 30 years.  The $700 boiler had been used about three years, the other about two.  The Atlas engine cost $400, was about two years old at the time of its destruction and had a 10-year life.  One of the saws destroyed cost $175 and the other $185.  The edger destroyed cost $400, had been in use 14 months and had a life of at least 10 years.  The belts and pulleys cost approximately $600 and were approximately two years old at the time of destruction.  The Moore dry kiln was built in 1923 at a cost of $3,500 and its value when destroyed was approximately its cost.  The shed over the mill and a log shed destroyed were built with lumber sawed from the petitioner's timber.  At least 15,000 feet of logs were destroyed and their cost was $4 per thousand feet, and it cost approximately $8 per thousand to cut and bring them to the mill, making a total cost of $12 per thousand at the mill.  Thirty thousand feet of lumber in the dry kiln destroyed cost $17 plus $5 dry*2120  kiln cost, or $22 per thousand.  About 34,000 feet of lumber destroyed cost $17 per thousand cut into lumber.  Depletion has been allowed the petitioner on this lumber at the rate of $4.75 per thousand.  The Commissioner disallowed a loss claimed by the petitioner in the amount of $11,575.27 on account of the destruction of the mill, machinery and lumber.  OPINION.  TRAMMELL: The petitioner is entitled to a deduction on account of the loss by fire of the property set out in the findings of fact based on the cost of such property less depreciation sustained, and with respect to the lumber less the amount of depletion already allowed thereon and less any amounts charged to expense in connection therewith.  The respondent contended that there was not sufficient basis as disclosed by the evidence for any deduction on account of the loss above, that is was not shown to what extent the amount claimed has not already been deducted as expenses or otherwise.  It is shown, however, what the property cost when acquired and, with respect to certain of the assets, their expected life.  With respect, however, to the saws, we have no evidence as to how long they would last when in use and*2121  we have evidence only as to the cost of two of them, apparently two of those which were in use.  It may well be that saws in use do not last more than two years, for all the record discloses.  We have no evidence as to the proper life of the sheds, or their cost.  The dry kiln cost $3,500 and there is no evidence that this was built out of lumber from the petitioner's timber, and there is evidence that its value was approximately the same as its cost when new.  It is clear, however, that some depreciation was *487  being sustained.  We think, however, from the testimony that it had a life of at least 20 years, and having been in use two years, its cost should be reduced in determining the loss to the extent of 5 per cent per year.  With respect to all of the lumber and logs destroyed, the cost of the manufactured lumber and that which had gone into the dry kiln should be reduced to the extent of depletion allowed at $4.75 per thousand.  Since the logs delivered at the mill cost $8 per thousand, this cost should be reduced as above stated in determining the deductible loss.  There is no evidence in the record to indicate whether the cost of placing the logs at the mill and manufacturing*2122  and dry-kilning the lumber was deducted as an expense.  Without some evidence on the question, we can not determine that it was not deducted as expense.  In this state of the record such cost may not be allowed as a loss and the cost of lumber and logs should not be increased by such amounts.  With respect to the edger which cost $400 and which had been in use four months when destroyed, there is no direct evidence upon which we could determine the rate of depreciation.  We think, however, that this edger had a life of at least 10 years.  The two boilers had a life of 30 years.  No amount can be allowed with respect to the belts and pulleys because we have no evidence from which we can determine whether they might have lasted two years or longer and we can not say, therefore, that when they were destroyed the petitioner actually lost anything, or that if he did lose anything, the amount thereof.  The deficiency should be recomputed upon the basis of the findings of fact and this opinion.  Judgment will be entered under Rule 50.