Court Opinion

ID: 4625501
Source: CourtListenerOpinion
Date Created: 2020-11-21 02:57:19.86369+00
Date Added: 2024-06-11T07:56:42.824666
License: Public Domain

MALCOLM & DYER CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Malcolm & Dyer Co. v. CommissionerDocket No. 11769.United States Board of Tax Appeals13 B.T.A. 37; 1928 BTA LEXIS 3325; July 24, 1928, Promulgated *3325  Where the Commissioner has based depreciation on an estimated life of 25 years and the petitioner maintains that an allowance based on a 10-year life is proper, the building having been continuously in use by the petitioner for a period of 12 years, the valuation for depreciation purposes will not be disturbed where no other evidence is adduced.  William D. Smith, Esq., for the petitioner.  Albert S. Lisenby, Esq., for the respondent.  MURDOCK *37  This is a proceeding for the redetermination of a deficiency in income and profits taxes for the calendar year 1920 amounting to $45.50.  The petitioner alleged that the Commissioner erred in disallowing a portion of the 10 per cent depreciation taken as a deduction in the calendar year in question.  *38  FINDINGS OF FACT.  The petitioner is a corporation organized under the laws of the State of Maine.  The building, depreciation upon which is the subject of dispute, was built in the year 1910.  The nature of the tenancy of the ground upon which the building was erected was one at will as the petitioner could not obtain a lease of the property.  The municipal government of the City of Augusta*3326  had power at any time to request the petitioner to remove the building, since it was erected over a regular street of the city.  It was constructed of wood, with a corrugated iron siding.  The cost of the building at commencement of the term over which depreciation is claimed was the basis of arriving at the amount of depreciation to be taken each year.  When the building was erected it was erected by a partnership of the same name as the petitioner.  The petitioner was organized in 1915, all the assets of the partnership being turned over to the corporation at that time.  At the beginning of the year 1920, there had been written off on account of depreciation the total sum of $1,067.  At the date of incorporation the total depreciable value set upon the books was $2,860.67.  It had become necessary at the time the building was taken over by the corporation to make certain improvements and the basic fugure at the date of incorporation was arrived at by taking the entire cost less depreciation to the date on which the corporation had taken it over.  No attempt was over made on the part of the city to require the petitioner to remove the building, although there was some difficulty*3327  experienced when it was erected in getting the consent of the proper authorities.  While the structure was built over the street, it did not constitute an obstruction to traffic.  OPINION.  MURDOCK: There is but one issue before the Board in this case and that is one of fact involving the amount of the depreciation allowance to which the petitioner is entitled for the taxable year in question.  The statute allows to taxpayers a reasonable allowance for exhaustion, wear and tear, and it has been the practice of the Commissioner in determining this allowance on buildings to estimate the life of the particular building in question and to spread the deduction for depreciation evenly over the period of such estimated life.  The petitioner contends that if at the time of incorporation it was determined by reason of the high cost of maintenance or the imminence of removal that the useful life of the property would be shortened, the portion of the cost or other basis of the property *39  not already provided should be spread over the remaining useful life as reestimated in the light of the subsequent facts.  At the time of the trial of the case the building in question was still*3328  in use.  The estimated life had in fact been exceeded at the date of the trial.  Nor does the record show facts occurring between the acquisition of the property by the taxpayer and the date of trial which would tend to accelerate depreciation.  We are therefore forced to the conclusion that the petitioner had incorrectly estimated its life.  While it might have been possible to show that although the petitioner's allowance for depreciation in the taxable year was excessive, the Commissioner's allowance was not adequate, no evidence was adduced to show that such was the case, and in the absence of such showing the determination of the Commissioner must be affirmed.  Judgment will be entered for the respondent.