Crown Margarin Co. v. Commissioner

Appeal of CROWN MARGARIN CO.

Crown Margarin Co. v. Commissioner

Docket No. 2090.

United States Board of Tax Appeals

1 B.T.A. 1110; 1925 BTA LEXIS 2657;

May 6, 1925, decided Submitted April 13, 1925.

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Martin Husman, president of the taxpayer corporation, for the taxpayer.

Ellis W. Manning, Esq., for the Commissioner.

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Before TRAMMELL, LOVE, and PHILLIPS.

The taxpayer appeals from a deficiency of $3,030.65 asserted by the Commissioner for income and profits taxes for the fiscal years ending January 31, 1920, and January 31, 1921, and alleges in its petition that the Commissioner erred in refusing to allow the taxpayer obsolescence on account of its machinery. At the hearing the taxpayer also contended that, if obsolescence were not allowed, it was entitled to additional depreciation on such machinery. From the testimony the Board makes the following

FINDINGS OF FACT.

The taxpayer is an Illinois corporation with its principal office in the City of St. Louis, Missouri. In 1917 it started the manufacture of butter and margarine and continued such business until 1924, when it discontinued the manufacture of margarine. During the years in question in this appeal, the taxpayer replaced certain of its machinery with new and improved machinery performing the same service. The Commissioner allowed deductions on account of obsolescence on the machinery replaced and for depreciation on the machinery account of the taxpayer at the rate of 10 per cent.

Early in the year 1921, but subsequent to the close of the fiscal year ending January 31, 1921, the margarine business began to show a loss. At first this was considered only a temporary condition, but it continued and the taxpayer was forced to discontinue its margarine business in 1924. This was true of others engaged in the same business. The result was that it was necessary in 1924 to scrap the machinery used in this business. This was subsequently sold for a very nominal sum.

There were no conditions in the business during the taxable years in question which indicated that it would be necessary to discontinue the margarine business.

DECISION.

The determination of the Commissioner is approved.