Glady Mfg. Co. v. Commissioner , 1 B.T.A. 337 ( 1925 )

Appeal of GLADY MANUFACTURING CO.

Glady Mfg. Co. v. Commissioner

Docket No. 227.

United States Board of Tax Appeals

1 B.T.A. 337; 1925 BTA LEXIS 2953;

January 16, 1925, decided Submitted November 18, 1924.

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">*2953 Taxpayer's depreciation allowance computed for the year 1920.

Mr. L. H. Buzzell, secretary-treasurer of Glady Manufacturing Co., for the taxpayer.

Robert A. Littleton, Esq. (Nelson T. Hartson, Solicitor of Internal Revenue) for the Commissioner.

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">*337 Before IVINS, KORNER, and MARQUETTE.

FINDINGS OF FACT.

The Glady Manufacturing Co. is a West Virginia corporation and has appealed from a proposed additional assessment of $232.89 for the year 1920, due to the computation of depreciation on property used in the business as indicated in the Commissioner's deficiency letter mailed August 7, 1924.

The depreciation allowed from 1917 to 1919 was computed by the Commissioner on a straight-line basis at 6 per cent for boilers, 20 per cent for log trucks and camp buildings, and 8 per cent for all other items. The amount of depreciation claimed for 1918, based on taxpayer's revised schedules, was computed on the economic life of the property and was so close to that computed by the Commissioner that the amount claimed by the taxpayer was allowed to avoid controversy, the difference in the amount of depreciation computed by each being only $419.15.

">*2954 In its original return for 1920 depreciation was claimed in the amount of $4,000. The taxpayer later contended for an allowance of $10,420.52 for the year and the Commissioner has allowed $4,667.10 on the basis of a revised depreciation schedule providing amortization over a 12-year life.

The total cost of depreciable property to December 31, 1920, was $47,705.31. The total depreciation reserve to December 31, 1919, as reported by a revenue agent, plus the additional depreciation allowed in 1918, amounted to $21,739.45, leaving a balance to be depreciated in 1920 and subsequent years of $25,965.86. The total amount of timber at December 31, 1920, before giving effect to 1920 depletion, was 17,228,000 board feet. The timber cut in 1920 was 5,184,336 feet.

">*338 DECISION.

The Board determines that, in view of the amount of timber cut in 1920, the depreciation allowed is too small and that taxpayer's depreciation for 1920 should be computed by dividing the residual value of its depreciable property in 1920 by the total quantity of timber at December 31, 1920, and multiplying the amount of timber cut in 1920 by the quotient so obtained as the rate of depreciation per">*2955 thousand feet of timber cut, as follows:

Total cost of assets December 31, 1920	$47,705.31
Less depreciation reserve December 31, 1919	$21,739.45
Balance to be depreciated after December 31, 1919	$25,965.86
Balance of timber to be cut	feet 17,228,000
Rate of depreciation per M	$1.51
Depreciation allowable, 1920, 5,184,336 feet, at $1.51 per M	$7,828.35

The determination of the Commissioner is disapproved and the deficiency to be assessed will be settled by the Board on consent or on seven days' notice under Rule 50.