Court Opinion

ID: 4487409
Source: CourtListenerOpinion
Date Created: 2020-01-17 22:00:45.000198+00
Date Added: 2024-06-11T08:49:17.509442
License: Public Domain

*639OPINION.
Littleton:
In his original answer, filed December 4, 1924, the Commissioner moved to dismiss the appeal, in so far as it related to *640the year 1920, on the ground that he had determined an overassess-menfc for that year, and that, therefore, the Board is without jurisdiction to consider the appeal for the year 1920.
At the hearing the Commissioner moved to amend his answer so as to allege that, in addition to his previous denial of taxpayer’s allegations, the amount of depreciation allowed by him on the building for each .of the years 1919 and 1920 should be further reduced for the reason that land of the valué of $8,050 was included in the amount of $70,150, upon which amount he computed depreciation, and that depreciation, therefore, should be computed at the rate of 3 per cent per annum, or $1,863 on $62,100, the cost of the building. This amendment was allowed.
The motion to dismiss the appeal as to the year 1920 upon the ground that the Board is without jurisdiction to consider that year must be overruled. Taxpayer is entitled to a decision as to the correctness of the deficiency asserted by the Commissioner. In an appeal from a deficiency in any year this Board has jurisdiction to consider the tax liability for any other year not barred by the statute of limitations when necessary to a correct determination of the deficiency asserted’. It is necessary, therefore, in this appeal, to consider the year 1920, for the reason that, if taxpayer’s appeal as to 1919 is allowed in whole or in part as to the depreciation claimed, it then becomes entitled to a greater depreciation than has been allowed for 1920. If the tax for 1919 is reduced, the invested capital for 1920 is affected. Appeal of E. J. Barry, 1 B. T. A. 156. Appeal of Hickory Spinning Co., 1 B. T. A. 409. Appeal of Tel-Electrie Co., 1 B. T. A. 434. This Board has jurisdiction to consider the year 1920 for the further reason that-the Commissioner, by amending his answer, has raised the issue that the amount of depreciation allowed by him in both the years 1919 and 1920 is excessive because computed upon an amount which is $8,050 in excess of the cost of the building.
The only question involved in this appeal is the amount of annual depreciation to which taxpayer is entitled for the years 1919 and 1920 on a building used in its business. In its returns for each of the- years 1919 and 1920, the taxpayer deducted depreciation on this building in the amount of $3,507.50, based upon an estimated life of 20 years. The amount claimed was 5 per cent of $70,150, the alleged cost of the building in 1917.
The Commissioner in the deficiency letter determined that the building erected in the latter part of 1917 had a probable life of 33y3 years and allowed depreciation thereon at the rate of 3 per cent per annum, or $2,104.50, upon the claimed cost of $70,150. The taxpayer claims that due to the nature of its business the building has a probable useful life of only 20 years, and that it is entitled to depreciation at the rate of 5 per cent per annum on the cost thereof. The probable useful life of the building and the amount of depreciation which should be allowed thereon must be determined from facts and circumstances, the materials of which the building is constructed, and the nature and character of the business for which it is used. Only a portion of this building is used for dyeing purposes, the remainder being unaffected by the chemicals used. It was admitted that, except for the effect of the chemicals used by this taxpayer, the depreciation allowed by the Commissioner on the cost of the building at 3 per cent would be reasonable, but it is claimed by tax*641payer that, due to the particular nature of its business and the effect upon the building of the chemicals in use in the same, its building is depreciating more rapidly and will be rendered useless at the end of 20 years. The building is substantially constructed of brick, concrete, and steel, with a very small portion of wooden floors, and covers a ground space of 200 feet by 100 feet. Of the entire building, only the three rooms used for dyeing purposes are affected by the chemicals, and it appears from the evidence that the effect thereof is greatly offset by ordinary repairs.
We are of the opinion upon the facts in this appeal that the probable useful life of this building is 33% years, as determined by the Commissioner, and that an allowance for depreciation and exhaustion qf 3 per cent per annum on its cost in 1917 is reasonable, and the Commissioner’s action in this regard is approved.
The evidence before us shows that the taxpayer in its returns and the Commissioner in his determination, as set forth in the deficiency letter, computed depreciation on this building for each of the years 1919 and 1920 upon a cost of $70,150 in 1917, and that this amount included land of the value of $8,050. Depreciation at 3 per cent per annum, or $1,863 on $62,100, the cost of the building in 1917, should be allowed for each of the years 1919 and 1920.