Multibestos Co. v. Commissioner

OPINION.

Miuliken:

In view of the above-mentioned stipulation, we need only consider the loss sustained on the rubber-reclaiming mill building during the taxable year. In support of the disallowance of this loss, the respondent cites article 143 of Regulations 45, which provides that a deduction may be taken on account of a loss in useful value of buildings “ only when they are permanently abandoned or permanently devoted to a radically different use,” and contends that the facts do not bring the petitioner within the prescribed test of deduction, to wit, a radically different use, as the building was continued in use in the manufacture of petitioner’s standard line of products.

We are not persuaded by this contention, even if in point. We are of the opinion that the building was devoted to a radically different use. Summarizing, the facts show the building was constructed as a rubber-reclaiming building and that at least two-thirds of the space contained therein was occupied by concrete-enclosed tanks especially designed for and peculiar to the rubber-reclaiming processes; that expensive remodeling added only a comparatively small amount of badly cut up floor space to the remaining one-third of the original floor space which was in any sense adaptable to the new use, and that such remodeling was done only because the building could not have been safely and economically razed to provide space for the erection of a more suitable building. Petitioner decided, in 1920, to attempt to reconstruct the building, not because it thought that the same could be suitably or economically adapted to its asbestos brake and clutch lining business, but because the building was centrally located and it needed the site upon which to carry on its regular business. Petitioner could have constructed a building suitable in size and dimensions at a cost of not to exceed $32,000, whereas because of the impracticability of demolition of the old building, it spent over $35,000 and had an unsatisfactory building-on its hands. We are unable to see the pertinency of respondent’s suggestion that the use is not radically different, because petitioner used it to carry on the manufacture of its standard line of products, for the mill was designed to serve in the production of rubber specialities and that line of production was permanently abandoned. The record convinces us that there is little resemblance between the processes required to reclaim rubber and those incident to the preparation and .mixing of cotton and asbestos raw materials.

The estimate made by petitioner’s officers that the residual value of the building in question amounted to $10,000, was fixed somewhat arbitrarily, as representing the maximum value. Their judgment is strongly supported by testimony indicating that the building was a liability rather than an asset, as the cost of constructing a new and more suitable building would have been less during either 1919 or 1920 than the amount expended in remodeling the old building. We have heretofore held that the opinion of the corporate officers is entitled to considerable weight in estimates of this character, Appeal of Dilling Cotton Mills, 2 B. T. A. 127; Kilby Car & Foundry Co. v. Commissioner, 4 B. T. A. 1294. In view of the supporting testimony, we feel constrained to accept their estimate. The deficiency will be recomputed, allowing as a deductible loss the difference between the stipulated depreciated value of the building and $10,000, its residual value, and to accord with the stipulation with respect to the other deductions claimed.

Judgment will be entered on 15 days’ notice, wider Rule 50.