Hamlet Ice Co. v. Commissioner ( 1929 )

HAMLET ICE CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Hamlet Ice Co. v. Commissioner

Docket No. 25516.

United States Board of Tax Appeals

16 B.T.A. 433; 1929 BTA LEXIS 2586;

May 9, 1929, Promulgated

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Value of certain machinery, which was discarded by petitioner in changing from the use of steam power to electric power, determined.

O. J. Tall, Esq., for the respondent.

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TRAMMELL

This is a proceeding for the redetermination of deficiencies in income tax of $2,549.79 and $27.82 for 1922 and 1923, respectively. The deficiency for 1922 results from the respondent's action in disallowing a deduction for depreciation and obsolescence in the amount of $21,697.04. In the petition it is alleged that the deduction disallowed should be reduced by the amount of $3,415, representing the value of machinery discarded during the taxable year in changing from the use of steam power to electric power. The deficiency for 1923 results from the disallowance of deductions taken for taxes. No error, however, has been assigned to the respondent's action in determining the deficiency for that year.

FINDINGS OF FACT.

During 1922 the petitioner changed the motive power of its plant from steam to electricity on account of the high price of coal. In doing this it discarded the following machinery which had been acquired on the dates and at the amounts indicated as follows:

Machinery.	Date acquired.	Original cost.
1 steam engine No. 1505	Oct. 11, 1909	$1,043.50
1 steam engine No. 217	Mar. 14, 1900	774.50
1 200-horsepower boiler	1907	1,440.00
1 100-horsepower boiler	1902	950.00
1 100-horsepower boiler	1905	990.00
2 brine pumps	1908	185.00
1 brine pump	1908	274.12
1 water pump	1911	75.00
3 stands of condensers	1900	500.00
2 Fore coolers	1902	1,000.00

Between the period from 1900 to 1909 and in the year 1922, the values of machinery of the character here involved increased materially.

The steam engines had a normal useful life of about 25 years. These engines were kept in a good state of repair and new parts were put in where defective. After the engines were discarded the petitioner sold a steam cylinder from one of them and also a part of the other. At the time discarded and abandoned in 1922, engine No. 1505 had a value of $550.

Certain of the tubes of the boilers were defective. The inspector for an insurance company objected to the tubes in two of them and the company would not issue a policy of insurance until the tubes were replaced, which was not done. One of the 100 horsepower boilers was condemned about 1922, and put out of service. It had no value for anything except scrap. The 100 horsepower boiler purchased in 1902 had been patched up once or twice and connected with a new boiler. The normal useful life of the boilers was about 15 years. They were abandoned in 1922. The petitioner cut them up, a part of them was sold and the remainder was thrown away.

The three stands of condensers had a normal useful life of from 20 to 25 years.

The fore coolers were metal tanks. Every year or two the water was drained out of them, and they were dried and painted inside and outside. The normal useful life of the coolers was from 20 to 25 years.

The amount received by the petitioner from the sale of all parts of the discarded machinery that were sold did not exceed $100. None of the machinery was held in reserve for future use.

In determining the deficiency for 1922 the respondent disallowed an amount of $22,527.34 as representing excessive depreciation and obsolescence claimed. This amount he reduced by $830.30, representing the amount he determined to be allowable as a result of the petitioner's discarding and abandoning of its machinery, making the net amount disallowed $21,697.04. The amounts allowed on the various items of the machinery were as follows:

	Amounts allowed.
Steam engine No. 1505	$313.05
Steam engine No. 217
200 horsepower boiler	288.00
100 horsepower boiler (acquired in 1902)
100 horsepower boiler (acquired in 1905)	99.00
2 brine pumps	46.25
1 brine pump	54.00
Water pump	30.00
3 stands of condensers
2 fore coolers
Total	830.30

Aside from steam engine No. 1505, the assets were not worth in excess of the values found by the respondent.

OPINION.

TRAMMELL: The pleadings in this case present the sole question as to the value of assets when abandoned. No controversy is presented that they were abandoned. The petitioner alleged in its petition that the value of the machinery discarded and abandoned was $3,415. However, in its brief it contends for a value of $1,719.95 in excess of the amount allowed by the respondent, although the different items claimed total $2,019.95.

In its brief the petitioner abandoned its contentions as to any values greater than those determined by the respondent for the three brine pumps and the water pump.

With respect to the other machinery the evidence was conflicting, and we are unable from the facts before us to determine that it had any value greater than that found by the respondent, except steam engine No. 1505, which we have found had a value of $550 at the time discarded and abandoned in 1922.

Inasmuch as no error was assigned nor any evidence offered with respect to the determination of the tax liability for 1923, the respondent's determination for that year is approved.

Judgment will be entered under Rule 50.