James v. Commissioner , 2 B.T.A. 1071 ( 1925 )

APPEAL OF J. R. JAMES.

James v. Commissioner

Docket No. 4068.

United States Board of Tax Appeals

2 B.T.A. 1071; 1925 BTA LEXIS 2176;

October 28, 1925, Decided Submitted September 2, 1925.

---

Frederick C. Vieson, Esq., for the taxpayer.

James S. Doyle, Esq., for the Commissioner.

---

Before KORNER.

This is an appeal from the determination of a deficiency in the income tax of an individual for the calendar year 1921 in the amount of $32.86. The question involved is whether the taxpayer is entitled to deduct from certain income, received as rent for his automobile, items of depreciation and expense incurred and paid within the taxable year.

FINDINGS OF FACT.

1. The taxpayer is a civil engineer in the employ of the Detroit Edison Co. at Detroit, Mich. He was so employed during the taxable year 1921, and among his duties was that of inspecting various stations of his employer at distances from Detroit, varying from 20 to 60 miles.

2. In November, 1920, the taxpayer purchased an automobile at a cost of $1,996.23. At that time he entered into an agreement with his employer that he should use his automobile in the performance of his duties and that the latter would pay him rent for such use of his automobile. In accordance with the terms of this agreement, the taxpayer did so use his automobile in the performance of his duties for his employer throughout the year 1921 and received as rent therefor the amount of $664.17.

3. During the taxable year 1921 the taxpayer spent $75 for repairs on the automobile. He likewise spent $132 garage rent for the same period. He spent for tires $80 and for insurance on the automobile $45.

4. In April, 1922, the taxpayer disposed of his automobile by trading it in on a new automobile, and in this trade he received a cash allowance therefor of $525. At the time he disposed of it, the automobile had been run 36,000 miles and had a useful life of approximately one more year. Under the use to which it was put, we find that the proper rate of depreciation on the automobile was 25 per cent.

5. The taxpayer employed the automobile in question for the use of himself and his family on Saturday evenings and Sundays as occasion required. The proportion of the use to which it was put in his employer's business was 80 per cent while the personal and family use was 20 per cent.

6. In returning his income for taxation for the year 1921, the taxpayer reported as income the amount received as rent for the automobile, to wit, $664.17. He computed the expense and depreciation as follows:

Depreciation	$400
Repairs	75
Garage rent	132
Tires	80
Insurance	45
Total	732

In his return he took deduction of only $664.17, that amount being exactly the amount of income which he had received as rent; but he took no deduction for the excess, $67.83, based on the tabulation above set out.

7. The automobile in question was used by the taxpayer in the transaction of his business under a contract of rental. The total depreciation sustained on the automobile for the year 1921 was $499.06, while the expenses connected with its operation were $312 - a total of $811.06. Eighty per cent of $811.06, to wit, $648.85, was a business expense. The remaining 20 per cent was a personal expense.

DECISION.

The deficiency should be computed in accordance with the foregoing findings of fact. Final determination will be settled on 20 days' notice, in accordance with Rule 50.