Motor Car Supply Co. v. Commissioner

MOTOR CAR SUPPLY CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Motor Car Supply Co. v. Commissioner

Docket No. 2088.

United States Board of Tax Appeals

9 B.T.A. 556; 1927 BTA LEXIS 2554;

December 12, 1927, Promulgated

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Depreciation allowable under section 234(a)(7) of the Revenue Act of 1918, is that accumulated in the taxable year alone and does not include depreciation accumulated in prior years and not deducted in prior income-tax returns.

S. F. Beach, for the petitioner.

John W. Fisher, Esq., for the respondent.

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TRUSSELL

By letter of January 12, 1925, the Commissioner served notice of deficiency upon the Motor Car Supply Co. of Chicago, Ill., in the amount of $540.93 for the calendar year 1919, and the 11-month period ending November 30, 1920. Petitioner appeals from only so much of the deficiency thus determined as pertains to the calendar year 1919, in the sum of $480.86. The deficiency in question arises from the disallowance by the Commissioner of $991.49 of depreciation charged off by petitioner and deducted in its tax return for that year.

The issue presented is whether or not, under section 234(a)(7) of the Revenue Act of 1918, depreciation may be computed by deducting from the decrease in value of the property, as determined by an appraisal, the total depreciation charged off and deducted in income-tax returns for the three preceding years.

FINDINGS OF FACT.

The petitioner, an Illinois corporation, purchased for its business certain used automobiles and carried them during 1916, 1917, and 1918 on its books in a "Furniture and Fixture" account and charged off and deducted in its income-tax returns for those years depreciation on these assets at the rate of 10 per cent. A reasonable rate of depreciation on these used automobiles was 25 per cent. During the calendar year 1919 petitioner had an appraisal made of the value of this property and deducted this from the original cost and the total loss in value thus established, less the depreciation deducted in the prior three years, it charged off and deducted in its income-tax return for 1919. The amount thus charged off in the sum of $2,600.80 was almost 50 per cent of the original cost of the property. The Commissioner allowed 25 per cent depreciation on this property, or $1,609.31 of this amount.

OPINION.

TRUSSELL: The allowable depreciation for the taxable year in question was depreciation sustained in that year alone. The method of computation used resulted in the inclusion of depreciation accumulated in prior years and not deducted in prior income-tax returns. . The action of the Commissioner must, therefore, be affirmed.

Judgment will be entered for the respondent.

Considered by LITTLETON, SMITH, and LOVE.