Parker Gravel Co. v. Commissioner , 21 B.T.A. 51 ( 1930 )

PARKER GRAVEL CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Parker Gravel Co. v. Commissioner

Docket No. 38348.

United States Board of Tax Appeals

21 B.T.A. 51; 1930 BTA LEXIS 1936;

October 15, 1930, Promulgated

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">*1936 1. A gravel pit or deposit is not a "mine" within the meaning of that word as used in section 204(c)(1) of the Revenue Act of 1926, and may not be the subject matter of a deduction for depletion based on discovery value.

2. Deduction allowable for depreciation determined from the record.

3. Miscellaneous expenditures analyzed and held to be part capital, and part expense deductible from income.

John J. Finnorn, Esq., for the petitioner.

A. S. Lisenby, Esq., for the respondent.

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TRAMMELL

">*51 This is a proceeding for the redetermination of a deficiency in income tax for an eight-month period ended December 31, 1925, in the amount of $1,009.31. The petitioner in its return for said period claimed deductions as follows: For depletion of a gravel pit, based upon discovery value, $5,124.79; for depreciation, $3,367.84; for "organization expenses," $433.96. The respondent disallowed the deductions claimed for depletion based upon discovery value and for "organization expenses," and of the deduction claimed for depreciation allowed $1,162.70 and disallowed $2,205.14. The action of the respondent in these respects is assigned by the petitioner">*1937 as error.

FINDINGS OF FACT.

The petitioner is a Louisiana corporation, organized May 4, 1925, with its principal office at Shreveport.

Prior to the beginning of 1925, J. E. Morgan, who had theretofore had 20 years experience in the gravel business, was confidentially informed by one Ross that a deposit of gravel showed in the sides of a well located on a tract of land in Webster Parish, Louisiana, owned by Joe R. Miller. Morgan thereupon sought out C. A. Parker, a railroad conductor and proposed to him that they combine Morgan's experience with Parker's capital, acquire mineral rights from Miller, and proceed to prospect the property for deposits of gravel.

At that time a railroad ran through the Miller property, having been constructed 18 to 20 years before for the purpose of hauling gravel from what was known as he "Jarrett" pit, located about 2 1/2 miles away. In previous years holes had been drilled on the Miller land, but the tests were barren of discoveries of any considerable ">*52 quantity of gravel. However, small outcroppings of gravel were visible.

Under date of January 2, 1925, a partnership agreement was entered into by and between Parker and Morgan">*1938 as follows:

ARTICLE 1. The parties do hereby declare they have associated themselves together informally as a Partnership, for the purpose of acquiring leases, options and contracts upon prospective mining properties and lands; to engage in the prospecting and developing of such leases and options in the search for gravel and sand deposits in commercial quantities; to purchase the necessary steam shovels, locomotives, cars, dredges and other equipment requisite for the full development of any such deposits as may be found by them or either of them, and to develop the necessary organization and facilities for the production, transportation and marketing of such products.

ARTICLE 2. The parties further agree that it is their intention to form a corporation under the laws of the State of Louisiana, in the event their activities hereunder are successful in locating deposits of sand or gravel in commercial quantities, and that all of their activities hereunder, jointly and severally, shall be considered as performed on behalf of such corporation and inuring to the benefit thereof; but in the event such exploration work is not successful, then such acts shall have been considered">*1939 as having been performed under this informal partnership agreement.

ARTICLE 3. It is further understood and agreed that the entire cost of such preliminary exploration and development work shall be borne by C. A. Parker, who hereby assumes and agrees to pay all expenses of every kind or character incident thereto up to the date of incorporation as hereinabove set forth; that a careful record of such expenditures shall be kept and maintained, and upon perfecting of said corporate organization, such corporation shall assume said indebtedness and make settlement thereof from the net earnings which otherwise would be available for dividends; said payments to be made at such times and in such manner as the Board of Directors of said corporation may authorize.

ARTICLE 4. Upon the Organization of such corporation, it is agreed that C. A. Parker shall be entitled to ownership of two thirds of the capital stock, and J. E. Morgan shall be entitled to ownership of the remaining one third of the capital stock of said corporation.

Under date of January 13, 1925, Parker and Morgan entered into a lease contract with Miller which provided in material part as follows:

Said J. R. Miller">*1940 agrees and authorizes said Parker and Morgan to mine excavate, remove, ship and sell all the sand and gravel and clay gravel from the property said Miller owns or may acquire in Sections 28, 29, 31, and 32, Township 18, Range 9, Webster Parish, La.

Said Miller is to receive in payment 7 1/2 cents per cubic yard for all gravel, sand, clay gravel, either washed or pit run removed from said land, and 1/2 of the amount of money receive dfrom any over burden sold by them.

Said Parker and Morgan agree to remove not less than ten thousand yards of gravel, sand or clay gravel during the present year and every year hereafter. The amount of over burden not to be considered, or pay to said Miller the amount of $750.00 on or before the close of the year. And the amount of $300.00 cash is at this time advanced to said Miller as part of this year's payment.

The advance payment of $300 was made to Miller in accordance with the terms of the contract.

The cost of the lease to Parker and Morgan was nothing.

">*53 After securing the lease from Miller some 20 or 30 test holes were bored on the land by Parker and Morgan, and in accition tests were made on adjoining lands leased">*1941 by them. Tests on the adjoining lands did not disclose gravel in commercial quantities, but gravel deposits below the surface were indicated on the Miller lands, varying in thickness from 10 to 35 feet over an area of slightly less than 30 acres. The thickness of the overburden varied. An engineer was employed to map and estimate the extent of the deposit. The engineer's report estimated the probable content of the gravel deposit at 524,000 cubic yards. Suitable equipment, in part second hand, was purchased by Parker and Morgan and a gravel pit known as the "Heard" pit was opened about 200 yards from the railroad which ran to the "Jarrett" pit. The first shipment of gravel was made on or about March 20, 1925, and production was continuous thereafter.

The "Heard" pit was located advantageously with reference to deliveries in Shreveport, La., 30 miles away, where the best prospective market was located. Two railroads were available for shipments. A trackage agreement was affected with the railroad company which allowed delivery to the competitive point, Sibley, La., and under this arrangement, the railroad absorbed the switching charges, thus giving an advantage to Parker">*1942 and Morgan on Shreveport deliveries of from $3 to $5 per car according to capacity and weight.

The prices of the petitioner's products, delivered in Shreveport, were as follows: Road gravel, if billed to the Parish, $1.65 per cubic yard; to private parties, $2.18 per cubic yard; for washed gravel, $2.83 per cubic yard. Included in these prices were freight rates, which were the same on all grades, of 2 1/2 cents per 100 pounds for public good roads materials, and 3 1/2 cents per 100 pounds for private parties, or a cost for the freight of 75 cents per yard and 94 1/2 cents per yard, respectively. Market prices at the pit were 60 cents per cubic yard for sand ballast, 90 cents per cubic yard for road gravel, and $1.75 per cubic yard for washed gravel. An average price at the pit for the entire output was about 95 cents per cubic yard. The prevailing royalty rate on gravel in this territory was 7 1/2 cents per cubic yard.

In this vicinity, the operation of a gravel pit was fraught with considerable risk and uncertainty. However, the Heard pit was always profitable, while operated by the petitioner. The petitioner operated another pit which proved to be unprofitable.

The">*1943 petitioner was incorporated on May 4, 1925, and on that date the Miller lease and equipment were transferred to it in exchange for its entire capital stock. Thereafter, the petitioner operated the business of extracting and selling gravel and sand. The ">*54 capital stock of the petitioner was issued to Parker and Morgan as provided in the partnership agreement. The gravel pit was operated at night as well as during the day whenever orders for material justified it, as frequently occurred.

The deduction for depletion was computed and claimed by the petitioner in its return as follows:

Gross income from Heard pit		$48,567.34
Deductions:
Royalties paid	$5,013.15
Depreciation	2,752.52
Organization and development expense	1,288.12
Various ordinary and necessary
expenses (itemized in return)	29,263.97
		38,317.76
Net profit before deducting depletion		10,249.58

Production, 68,058 cubic yards.

Depletion deduction claimed allowable, 50% of $10,249.58, of net amount, $5,124.79.

A reasonable allowance for depreciation of the petitioner's assets, computed on the record, is as follows:

Asset	Cost	Rate	Annual amount
		Per cent
Railroad spur	$9,497.50	5	$474.87
Locomotive	3,671.35	10	367.13
Steam shovel	16,353.27	20	3,270.65
Dredge	4,971.70	20	994.34
Grading equipment	237.08	20	47.42
Light plant	75.00	10	7.50
Total for 12 months			5,161.91
Proportion for 8 months			3,441.27

">*1944 In 1925 the expenditures for the petitioner included the following: (1) Legal services and recording fees relative to a chattel mortgage on equipment acquired, $13; (2) legal services and other organization expenses aggregating $194.63; (3) expenses of traveling for business purposes, $104.33; and (4) engineering services in mapping territory and estimating the extent of gravel deposit, $122.

In determining the deficiency, the respondent computed petitioner's net income as follows:

Net income as shown by return		$2,879.65
Additions:
1. Depletion disallowed	$5,124.79
2. Excessive depreciation	2,205.14
3. Oranization expense	433.96
		7,763.89
Adjusted net income		10,643.54

">*55 OPINION.

TRAMMELL: The deficiency involved in this proceeding results from the action of the respondent in disallowing certain deductions claimed by the petitioner in its return as follows: (1) A deduction for depletion of a gravel deposit or pit, based on discovery values, in the amount of $5,124.79; (2) in part, a deduction for depreciation in the amount of $3,367.84; and (3) a deduction for "organization expenses" in the amount of $433.96. The petitioner">*1945 alleges that the respondent's action constitutes error. The issue of depletion will be first considered.

The statute applicable here is the Revenue Act of 1926, which provides in pertinent part as follows:

SEC. 234. (a) In computing the net income of a corporation * * * there shall be allowed as deductions:

* * *

(8) In the case of mines, oil and gas wells, other natural deposits, and timber, a reasonable allowance for depletion and for depreciation of improvements, according to the peculiar conditions in each case; * * * In the case of leases, the deductions allowed by this paragraph shall be equitably apportioned between the lessor and lessee.

SEC. 204. (c) The basis upon which depletion, exhaustion, wear and tear, and obsolescence are to be allowed in respect of any property shall be the same as is provided in subdivision (a) or (b) for the purpose of determining the gain or loss upon the sale or other disposition of such property, except that -

(1) In the case of mines discovered by the taxpayer after February 28, 1913, the basis for depletion shall be the fair market value of the property at the date of discovery or within thirty days thereafter, if such mine were">*1946 not acquired as the result of purchase of a proven tract or lease, and if the fair market value of the property is materially disproportionate to the cost. The depletion allowance based on discovery value provided in this paragraph shall not exceed 50 per centum of the net income of the taxpayer (computed without allowance for depletion) from the property upon which the discovery was made, except that in no case shall the depletion allowance be less than it would be if computed without reference to discovery value. Discoveries shall include minerals in commercial quantities contained within a vein or deposit discovered in an existing mine or mining tract by the taxpayer after February 28, 1913, if the vein or deposit thus discovered was not merely the uninterrupted extension of a continuing commercial vein or deposit already known to exist, and if the discovered minerals are of sufficient value and quantity that they could be separately mined and marketed at a profit.

(2) In the case of oil and gas wells the allowance for depletion shall be 27 1/2 per centum of the gross income from the property during the taxable year. Such allowance shall not exceed 50 per centum of the net">*1947 income of the taxpayer (computed without allowance for depletion) from the property, except that in no case shall the depletion allowance be less than it would be if computed without reference to this paragraph.

">*56 The petitioner here contends that it is entitled to a deduction for depletion of its gravel pit based on discovery value, while the respondent asserts that a gravel pit is not a "mine" within the meaning of that term as used in the taxing statute, and hence does not come within the purview of the provisions above quoted.

If the petitioner is to prevail in its contention, the term "mines" as used in the statute must be construed to comprehend a gravel pit. What, then, is the meaning of this term as it is used in the Revenue Act of 1926, supra?

At the outset it will be noted that the statute provides generally in section 234(a)(8) for a reasonable allowance for depletion in the case of (1) "mines," (2) oil and gas wells, (3) other natural deposits and (4) timber. It is apparent Congress did not intend the word "mines" as used in this section to embrace oil and gas wells, or other natural deposits, since these are separately specified, nor would it, of">*1948 course, include timber.

That the owrd "mines" is used in this statute not in its broadest significance, but in a restricted sense, is still more apparent from a reading of section 204(c), where it is provided in subdivision (1) that the basis for depletion "in the case of mines," with certain restrictions, shall be the fair market value of the property at the date of discovery or within thirty days thereafter, and in subdivision (2) special provision is made for depletion "in the case of oil and gas wells."

In its primary and restricted sense, the word "mine" denotes an underground excavation made for the purpose of getting minerals. Sovereign Camp Woodmen of the World v. Arthur,222 S.W. 729">222 S.W. 729; People v. Bell,86 N.E. 593">86 N.E. 593; Northern Pacific Ry. Co. v. Mjelde,137 P. 386, 389; Kreps v. Brady,133 P. 216, 220; Barton v. Wichita River Oil Co.,187 S.W. 1043">187 S.W. 1043.

A mineral is any substance not of the animal or vegetable kingdom and, therefore, the word "mines" in its broadest significance would include "oil and gas wells" and "other natural deposits." Yet, as we have just shown, ">*1949 it is apparent from a reading of the taxing statute that the term is not there used in that sense.

In Marvel v. Merritt,116 U.S. 11">116 U.S. 11, the court, referring to mines and minerals, says:

The words used are not technical, either as having a special sense by commercial usage or as having a scientific meaning different from their popular meaning. They are the words of common speech, and as such their interpretation is within the judicial knowledge, and therefore matter of law.

Again, it has been said that the word "mineral" is a word of general language which, in the scientific division of matter, includes every substance not of the animal or vegetable kingdom, and its usage may not, therefore, be determined by the ordinary definitions ">*57 of the dictionaries in given cases, but its meaning must be derived from the intention with which it is used in a particular instrument or statute. Northern Pacific R.R. Co. v. Soderberg,188 U.S. 526">188 U.S. 526; Dingess v. Huntington, etc., Co.,271 F. 864.

Since it is at once apparent that in the Revenue Act Congress did not use the word "mines" in its broadest sense, what, then, ">*1950 is the judicial interpretation of the term when used in a restricted sense?

In Wheeler v. Smith,32 P. 784, the court states that the word "mines," as that term is known to the mineral laws of the United States, "embraces nothing but deposits of valuable mineral ores, and does not include mere masses of non-mineralized rock, whether rock in place or scattered about through the soil."

Ordinarily, the extraction of oil or gas from the earth is not spoken of as mining, nor is an oil or gas well a mine in the primary and restricted sense of the word. Hollingsworth v. Berry,192 P. 763; Guffey Petroleum Co. v. Murrel,53 So. 705">53 So. 705; Carter v. Phillips,212 P. 747.

In its broadest sense, as belonging to one of the three great divisions of matter, viz., animal, vegetable, and mineral, gravel, like oil and gas, may be considered to be a mineral, but in its restricted sense it is not a mineral. Hender v. Lehigh Valley R.R. Co.,58 A. 486; United States v. Aitken, 25 Philippine 7, 14; ">*1951 Sult v. Oil Co.,61 S.E. 307">61 S.E. 307.

In United States v. Aitken, supra, the Government sought to eject the appellees from a parcel of land located by them under the mining laws as a placer mining claim, valuable for the gravel it contained. The issue involved was whether the material which induced the appellees to apply for a patent was susceptible of location under the mining laws relating to the occupation and purchase of public lands containing valuable "mineral" deposits. Thus, the specific question before the court was whether gravel was a "mineral." The court in its opinion said:

It is true that commercial gravel belongs to the mineral kingdom in that it is inorganic and that it is formed by nature alone. But there is an important distinction between it and any of the so-called minerals as recognized by the authorities. Practically speaking, all the definitions of the word "mineral" agree that such a substance must always have a definite chemical composition by which it can be easily recognized, in whatever part of the earth it may be found. There can be no such uniformity in the chemical content of gravel deposits, for the reason that this depends">*1952 entirely upon the character of the mineral deposits which have contributed to their formation. And upon the character, quantity, and proximity of the minerals to the gravel deposit, their susceptibility to erosion, the violence with which the erosion is accompanied, the duration of the eroding process, as well as various other facts, depends the size of the pebbles and the quality of the deposit as commercial gravel. There is nothing constant in the character of commercial gravel by which to identify it ">*58 as a mineral, except that it consists of broken fragments of rock mingled with finer material, such as sand and clay. Nothing definite can be said of its chemical composition as can be said of the minerals. Commercial gravel is simply a jumbled mass of fragments of various minerals (rocks). Science, at least, cannot accept as a distinct subdivision of the mineral kingdom any substance whose character and attributes are so composite and fluctuating. It is true that beds of sandstone and limestone may possibly owe their origin in some instances to deposits of ordinary gravel. (Barringer and Adams on The Laws of Mines and Mining in the United States; Enc. Brit., 11th">*1953 ed. Title "Gravel.") But commercial gravel has not yet reached that stage. So far as scientific classification goes, then, commercial gravel can not be considered as a mineral.

* * *

But it is clear that it can not be legitimately considered as a mineral in any scientific sense of the word, because it has been persistently ignored in all the treatises on mineralogy and kindred subjects. And to hold that the term "mineral" as used in the Act of July 1, 1902, includes commercial gravel, it would seem necessary to conclude that Congress intended to include within it a substance which, despite its frequency and the variety of uses to which it was put at the time of the passage of the Act, had never been considered as coming within the term by any recognized authority. * * *

In Zimmerman v. Brunson (39 L.D. 310, 1911), the United States Land Department was called upon to decide for the first time whether commercial gravel could be located as a placer mineral claim. In that case it was said:

"Conceding that the twenty acres are chiefly valuable for gravel and sand, which can be used in connection with cement forming concrete, used in the construction of">*1954 buildings, does such a deposit confer upon them a mineral character so as to except them from homestead entry? * * *"

A search of the standard American authorities has failed to disclose a single one which classifies a deposit such as claimed in this case as mineral, nor is the Department aware of any application to purchase such a deposit under the mining laws. This, taken into consideration with the further fact that deposits of sand and gravel occur with considerable frequency in the public domain, points rather to a general understanding that such deposits, unless they possess a peculiar property or characteristic giving them special value, were not to be regarded as mineral.

The Revenue Act of 1926, supra, provides generally for the allowance of reasonable deductions for depletion in the case of "mines, oil and gas wells, other natural deposits and timber," and it is axiomatic to say that no kind of property may be the subject matter of an allowance for depletion which does not fairly come within one of these four classifications. Inclusio unius est exclusio alterius. In addition to this general provision, the statute provides a specific basis for computing depletion">*1955 in the case of "oil and gas wells," and also contains a special provision for depletion on the basis of discovery value only in the case of "mines."

It is apparent, we think, that Congress no more intended the word "mines" as used in this statute to include "other natural deposits" than it was intended to include oil and gas wells or timber. We can not assume that Congress was engaged in idle expression when it employed the words "oil and gas wells" and "other natural deposits" ">*59 in association with the word "mines," and in order to give meaning to all of the words used, it is obvious that the word "mines" must be read in its restricted sense as including only what is generally included under the word "minerals."

If it be held that the word "mines" is here used in its broad sense to embrace a gravel pit, it must be held that gravel in the same sense is a "mineral." We would then be unable to attach any significance to the words "other natural deposits" used in the statute, since any natural deposit is within the broad meaning of the word a "mineral" and an excavation to recover such mineral is a "mine." Water, in the broad sense of the word, is a mineral, and a well in">*1956 that sense might then be called a "mine," but certainly the word "mine" is not generally so understood. If such a construction be given to the statute, not only would the words "other natural deposits" have no meaning or effect, but a direct conflict in terms would result, for the reason that there could be no natural deposits other than mines.

If Congress had intended such meaning, the statute could easily have been framed to read: "mines, including oil and gas wells, and other natural deposits," but we can not supply what has been thus omitted. It is our conclusion, therefore, that a gravel pit or deposit is not embraced within the term "mines" as used in the sections of the Revenue Act of 1926, above quoted. The allowance for depletion based upon discovery value being authorized only in the case of mines, such a deduction is as effectively prohibited in the case of property not coming within that classification as if the statute specifically so stated. Here again we apply the maxim, inclusio unius est exclusio alterius.

From what we have said above, it follows that the petitioner is not entitled, under section 204(c)(1), supra, to a deduction for depletion of its">*1957 gravel pit based upon discovery value. The respondent's determination on this issue is approved.

We may point out, however, that, on the state of the record before us we would be compelled to deny allowance of the deduction claimed by the petitioner for depletion on other grounds also. The statute authorizes the depletion allowance only in the case of mines "discovered by the taxpayer." The gravel pit here in question, even if it should be conceded to be a "mine," was discovered by Parker and Morgan apparently some time during the months of January, February, or March, 1925. We are unable to determine from the evidence the exact date of the discovery. At any rate, active operation of the property was commenced on or about March 20, 1925, after which date production was continuous, and the taxpayer corporation was not organized until May 4, 1925. In the light of ">*60 these facts, it is our opinion that the taxpayer did not discover the gravel deposit, and is therefore not entitled to a depletion allowance based on discovery value. ">*1958 Evangeline Gravel Co.,13 B.T.A. 101">13 B.T.A. 101, 13 B.T.A. 101">104. See also Melville G. Thompson,10 B.T.A. 25">10 B.T.A. 25.

The statute further provides that in the case of mines discovered by the taxpayer, the basis for depletion shall be "the fair market value of the property at the date of discovery or within thirty days thereafter." The record not only fails to show that the gravel pit involved here was discovered by the taxpayer, but it fails to establish definitely the date of the discovery, and wholly fails to establish "the fair market value of the property at the date of discovery or within thirty days thereafter." Some testimony was offered to prove the amount of profit per cubic yard which it was anticipated could be realized from the excavation and sale of gravel and other material from the petitioner's pit. But such testimony alone affords no sound basis for determining the fair market value of the property at date of discovery or within thirty days thereafter, even if discovered by the taxpayer, nor was any effort made otherwise to establish such value. See ">*1959 Charles Warner Co.,8 B.T.A. 1112">8 B.T.A. 1112.

And, lastly, the petitioner failed to prove the amount of its production for the taxable year, and even if the requirements of the statute had been met and the other essential factors proved, we would be unable to determine the amount of the deduction for depletion to which the petitioner would be entitled, and on this ground alone would be compelled to deny the relief sought. Robert Roberts,20 B.T.A. 345">20 B.T.A. 345.

On the second issue, involving the deduction claimed by the petitioner for depreciation, the evidence is more definite and satisfactory. The depreciable assets consisted of (1) railroad spur, (2) locomotive, (3) steam shovel, (4) dredge, (5) grading equipment, and (6) light plant. The parties are in disagreement only with respect to the rates to be applied, and as to the last item, the light plant, each has used an annual rate of 10 per cent.

In reference to the railroad spur, the evidence is insufficient to enable us to determine the probable period of useful life, and hence the rate fixed by the respondent will not be disturbed. There was testimony that the rails had a useful life of approximately 10">*1960 years from date of acquisition, but this is not sufficient to justify us in holding that the railroad spur as a whole, consisting not only of the rails but also of fittings, crossties, grade and probably other parts, had a useful life other than the period of 20 years determined by the respondent.

The petitioner in its return claimed depreciation on a locomotive at the rate of 10 per cent; the respondent allowed 5. There is some ">*61 testimony to show that the period of useful life may have been between 5 and 7 years, but it is not, in our opinion, of a quality to convince us that this period should be adopted. From all of the evidence we conclude that the petitioner has established the reasonableness of the rate of 10 per cent originally claimed, but no more; and this is sufficient to prove that the respondent's rate of 5 per cent is inadequate.

On the steam shovel, dredge, and grading equipment, the testimony establishes periods of useful life of approximately five years each, and as to these items we have fixed the rate at 20 per cent. In recomputing the deficiency a deduction for depreciation will be allowed in the amount of $3,441.27, as set out in our findings">*1961 of fact, above.

The third issue involves a question of the deductibility of various expenditures which were mistakenly claimed in the return to be "organization expenses." The evidence now enables a proper designation of these expenditures. An amount of $194.63, expenses incident to the organization of the petitioner, is not deductible from income. Hershey Manufacturing Co.,14 B.T.A. 867">14 B.T.A. 867, 14 B.T.A. 867">877, and cases there cited. An amount of $122 paid for engineering services in ascertaining the extent and character of the gravel deposits is, in our opinion, a capital expenditure. Cf. C. M. Nusbaum,10 B.T.A. 664">10 B.T.A. 664. The amounts of $13 and $104.33 expended for various items are ordinary and necessary business expenses properly deductible from income.

Reviewed by the Board.

Judgment will be entered under Rule 50.

TRUSSELL and SEAWELL dissent.