Buedingen v. Commissioner , 6 B.T.A. 335 ( 1927 )

OPINION.

Phillips :

The facts are recited above. We are of the opinion that the amount paid the architect for plans and specifications for a factory building, which plans and specifications were discarded in 1920 and not thereafter used, is deductible. The architect who drew these plans also drew the plans for the building which was completed, but as a witness he testified that the previous plans were of little or no aid to him, were not used, and that the full amount of the architect’s fee was charged for the second plans without reference to the fee charged for those discarded. We are also of the opinion that the amounts expended for temporary partitions, roofing, heating, sewerage, etc., in 1920 are deductible. Upon the hearing there was detailed evidence concerning each item entering into the amount allowed. All the expenditures were for work of a temporary character made necessary by the condition of operations during the period of removal, no part of them represented the cost of the finished buildings, and the temporary construction had no use beyond the taxable year involved. In such circumstances, these items also constitute ordinary and necessary expenses for tbe taxable year and are deductible as such. The Commissioner disallowed them because there had been no segregation from a larger amount claimed and disallowed.

The petitioner also claims that, because of the extraordinary conditions existing in the building trades in 1920, and because of the necessity of expediting completion of the temporary building and of the now permanent building, large premiums or bonuses were-necessary to procure materials. It is further contended that, because of this situation and the high wages paid in the building industries, the cost of the buildings was excessive and exceeded the reasonable cost thereof, assuming that they had been built under normal conditions, by approximately $32,500. It is claimed that this amount constitutes a deduction either as an ordinary and necessary expense of conducting the business, or as a loss brought about by the sale of the Canal-Street property. With this contention we' do not agree. Even though it might be proper to do so, it is impossible to determine what part of such so-called excessive cost is due' to the necessity-of early completion of the work and what part- is due to the high cost of materials and labor existing in those years.

The buildings undoubtedly cost more to erect than would have been the cost had they been erected at a period when material and labor were more normal. This, however, does not alter the fact that the amounts were paid as a part of the capital cost of the construction of the buildings and that under section 215(b) of the Kevenue Act of 1918 no deduction may be allowed.

The petitioner further contends that the alleged profit on the disposition of the Canal Street property was not taxable but is in effect an exchange of property as contemplated under section 202" of the Eevenue Act of 1918. We see.nothing in' the provisions of that section which" has any application to the situation presented by the facts. "

While the appeal purports to include the year 1921, no errors are alleged with respect to that year, nor does it appear that the. Board has any jurisdiction. Appeal of Cornelius Cotton Mills, 4 B. T. A. 255. ■

Order will be entered dismissing the appeal as to 1921. Decision redetermining the deficiency for 1920 will be' entered on 15 days', notice, under Rule 50.