Ebbert v. Commissioner

DANIEL F. EBBERT, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Ebbert v. Commissioner

Docket No. 18989.

United States Board of Tax Appeals

9 B.T.A. 1402; 1928 BTA LEXIS 4223;

January 18, 1928, Promulgated

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Damages to petitioner's residence property caused by excavations on adjoining property not allowable deductions from gross income under section 214(a)(6) of the Revenue Act of 1924.

Daniel F. Ebbert pro se.

A. H. Murray, Esq., for the respondent.

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MURDOCK

This is a proceeding for the redetermination of a deficiency in income tax for the calendar year 1924, in the amount of $719.64, arising from the refusal of the Commissioner to allow as a deduction from gross income the sum of $1,872.99, representing damages to the foundation of the petitioner's residence property. The facts were stipulated.

FINDINGS OF FACT.

The petitioner is an individual and resided at Wheeling, W. Va., during the year in question. For a number of years, including 1924, the petitioner owned a brick building which he used exclusively as his residence. Near to it, and in the rear thereof, the roadway of the Pennsylvania Railroad Co. is located. This company in excavating or changing its trackage removed ground near the petitioner's residence, thereby causing other ground to cave in and the walls of petitioner's residence to crack. The petitioner warned said railroad company regarding said excavations, inasmuch as they were trespassing, but the petitioner has never been reimbursed by the railroad company for any damage which may have been done by them.

During 1924, the petitioner replaced, repaired, and built such wall as was necessary under the circumstances described, the cost of which amounted to $1,872.99. This amount the petitioner deducted from his income-tax return, claiming it as a loss not compensated for by insurance or otherwise, sustained by him in the taxable year, occasioned through casualty. The Commissioner contends that the expenses penses of repairing the walls of the petitioner's residence was an additional cost of the property and that as such the amounts so expended should be capitalized.

OPINION.

MURDOCK: Section 214(a)(6) of the Revenue Act of 1924, reads as follows:

SEC. 214. (a) In computing net income there shall be allowed as deductions:

(6) Losses sustained during the taxable year of property not connected with the trade or business * * * if arising from fires, storms, shipwreck, or other casualty, or from theft, and if not compensated for by insurance or otherwise. The basis for determining the amount of the deduction under this paragraph, * * * shall be the same as is provided in section 204 for determining the gain or loss from the sale or other disposition of property.

Section 204(b) of the Revenue Act of 1924, provides as follows:

(b) The basis for determining the gain or loss from the sale or other disposition of property acquired before March 1, 1913, shall be (A) the cost of such property * * * or (B) the fair market value of such property as of March 1, 1913, whichever is greater. * * *

The cause of the damage to the petitioner's property in this case did not arise from an "other casualty" within the contemplation of that term as used in the above section of the Act. The Board has held that in construing the words "other casualty" the rule of ejusdem generis is applicable, and in order that a loss sustained by an individual, resulting from an "other casualty" may be deductible from gross income under this provision of the Act, it must appear that the casualty was of a similar character to a fire, storm, or shipwreck. See .

Further construing this section of the Act, we think the language of the Board in the case of , is controlling herein. It was there stated as follows:

There is a clear distinction between an expense of maintenance and repair, whether arising through ordinary wear and tear or through extraordinary damage, and a loss of the property itself. * * *

It is plain from the language of section 214(a)(6) that the losses contemplated are losses of the property itself and not the cost of repair or replacement; for the measure of the loss is either the cost of the property or its value on March 1, 1913, if acquired prior thereto. This is inconsistent with the idea that the loss is to be either measured or characterized by the cost of repair or replacement. * * *

In the present case, even if the petitioner were correct in theory he would necessarily fail because there is no evidence either of cost or of the March 1, 1913, value of the property damaged.

Judgment will be entered for the respondent.