Court Opinion

ID: 4480002
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:13:59.172578+00
Date Added: 2024-06-11T15:03:33.389390
License: Public Domain

Withet, J., concurring: I concur in the result reached herein. In my view this case is distinguishable on its facts from either United States v. Motorlease Corporation, 334 F. 2d 617 (C.A. 2, 1964), reversing 215 F. Supp. 356 (D. Conn. 1963), or Fribourg Navigation Co. v. Commissioner, 335 F. 2d 15 (C.A. 2, 1964), affirming a Memorandum Opinion of this Court, and is not controlled by those cases. A deduction for depreciation, provided for the first time in sections IIB and IIG(b) of the Revenue Act of 1913 and presently authorized by section 167 of the Internal Revenue Code of 1954, is one of the few, if not the only, provisions of the tax law wherein Congress has given statutory voice to a principle of cost accounting, i.e., that the annual expense of doing business should be an offset against the ordinary income produced by that business. Courts have many times in enunciating the philosophy of depreciation used the following language in one form or another: The annual deduction for depreciation together with annual deductions throughout the useful life of an income-producing asset should equal at the end of its useful life its cost basis less the salvage value thereof in order that the taxpayer may be able to recover that basis and have enough set aside to then replace the womout asset. In my view the key to the instant issue lies in the proper understanding of the word “recovery” as so used. What is actually meant in its use and what Congress intended in allowing a deduction for depreciation was that a recovery be made of the cost of such an asset tax free as an offset against ordinary income. To refuse to permit a taxpayer to take a proportionate deduction for depreciation in the year of sale of an income-producing asset is to vitiate congressional intent, for a portion of its cost can never then be recovered, for it may then never be an offset against ordinary income but may only be an offset against capital gain resulting from a sale or exchange thereof.