Court Opinion

ID: 4600660
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:26:04.064773+00
Date Added: 2024-06-11T07:52:20.444053
License: Public Domain

MOGG COAL & COKE CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Mogg Coal & Coke Co. v. CommissionerDocket No. 12408.United States Board of Tax Appeals10 B.T.A. 588; 1928 BTA LEXIS 4074; February 7, 1928, Promulgated *4074  Under the evidence, held that the petitioner expended during the fiscal year ended Amrch 31, 1921, $4,236.98 for repairs to a certain trestle, coal bins, scale and driveway, and that it is entitled to deduct that amount, in computing its net income, as an ordinary and necessary business expense.  Harry B. Sutter, Esq., for the petitioner.  James A, O'Callaghan, Esq., for the respondent.  MARQUETTE *588  This proceeding is for the redetermination of a deficiency in income and profits taxes for the fiscal year ended March 31, 1921, in the amount of $1,772.09.  The entire deficiency arises from the disallowance by the respondent of a deduction in the amount of $4,236.98 taken by the petitioner on its return for the fiscal year mentioned, representing the cost of repairs made on certain property.  FINDINGS OF FACT.  The petitioner is an Illinois corporation with its principal office and place of business at Chicago, and it is and was during the times mentioned herein engaged in the business of selling coal, coke, and wood.  During the period April 1, 1920, to March 31, 1921, the petitioner occupied, as tenant at will under a lease from the*4075  New York Central Railroad, certain premises containing a wooden trestle about 225 feet long, wooden coal bins, a wooden plank driveway about 30 feet wide and 200 feet long, scales and an office made of concrete.  The coal bins were located along the trestle.  For about 100 feet there were bins on both sides of the trestle, for the next 80 feet there were were no bins.  Some time between April 1, 1920, and March 31, 1921, an inspection of the premises occupied by the petitioner was made by the New York Central Railroad Co. and it was determined from that inspection that the petitioner's trestle was not in serviceable condition and the petitioner was ordered to replace the trestle.  The New York *589  Central Railroad enforced the order by refusing to deliver loaded cars on the trestle in its then condition.  Shortly after it was ordered to repair the trestle, the petitioner employed a contracting firm to put its premises and equipment in serviceable condition.  The contracting firm rebuilt that part of the trestle along which there were no bins, replacing the wooden uprights with concrete ones.  The remainder of the trestle was repaired sufficiently to make it serviceable*4076  and safe.  These repairs consisted largely of removing portions of the timber uprights and replacing the removed portions with other timber.  Part of the timber used for replacements was taken from that portion of the trestle which was replaced with concrete.  The contractors also repaired the remainder of the petitioner's equipment.  The repairs to the bins consisted of putting in new supports and new boards here and there, nailing loose ends of boards in place, and replacing some of the boards in the bottom of the bins.  The floor of the scale was repaired by putting in new boards where they were needed.  The plank driveway was also repaired by relaying so much of the planks and 2 by 4 timber as was necessary to put the driveway in serviceable condition.  As far as possible the contractors used in these repairs timber taken from that part of the trestle which had been replaced with concrete.  It was necessary for the petitioner to make repairs on the trestle, bins and driveway each year.  The total cost of rebuilding and repairing the trestle, bins, scale and driveway was $9,236.98, of which at least $4,236.98 was the cost of repairing that portion of the trestle not replaced*4077  with concrete, and repairing the bins, scale and driveway.  These expenditures were made during the period April 1, 1920, to March 31, 1921.  The petitioner kept its books on a fiscal year basis ended March 31, and they were kept on that basis for the year ended March 31, 1921.  A tax return was filed by the petitioner for that fiscal year on June 13, 1921.  The return included all of the gross income of the petitioner, all of its expenses and disbursements, and its invested capital, and there were attached to the return exhibits explaining the various items of income and deductions shown on the face of the return.  In the return $5,000 of the expenditure of $9,236.98 above mentioned was allocated to capital as representing the amount expended for the portion of the trestle rebuilt, and the balance, $4,236.98 was deducted from gross income as an ordinary and necessary business expense.  No other return for the fiscal year ended March 31, 1921, was ever filed by the petitioner.  The respondent, upon audit of the return filed, disallowed the said deduction of $4,236.98 and determined that there is a deficiency in tax in the amount of $1,772.09.  *590  OPINION.  MARQUETTE: *4078  The petitioner contends that having on June 13, 1921, filed a return for the fiscal year ended March 31, 1921, under the Revenue Act of 1918, which correctly set forth all of its income, invested capital and deductions claimed, with full and complete information relative thereto, it was not required to file a second return under the Revenue Act of 1921, and that assessment and collection of the deficiency herein are barred.  It also contends that the deduction of $4,236.98 taken on its return on account of repairs made to the trestle, coal bins, and driveway are proper and should be allowed.  Upon consideration of the evidence presented, we are of the opinion that the petitioner expended during the fiscal year under consideration the amount of $4,236.98 in making repairs to the trestle, coal bins, and driveway.  This expenditure was not for new assets or the replacement of old ones, but was merely for the purpose of keeping the property in an efficient operating condition, and it constituted, in our opinion, an ordinary and necessary business expense which the petitioner is entitled to deduct in computing its net income.  With this adjustment in the petitioner's income there will*4079  be no deficiency in tax for the fiscal year ended March 31, 1921, and it is therefore not necessary for us to pass on the other question presented.  Judgment will be entered for the petitioner.