Excelsior Laundry Co. v. Commissioner , 3 B.T.A. 1303 ( 1926 )

APPEAL OF EXCELSIOR LAUNDRY CO.

Excelsior Laundry Co. v. Commissioner

Docket No. 158.

United States Board of Tax Appeals

3 B.T.A. 1303; 1926 BTA LEXIS 2432;

April 19, 1926, Decided Submitted September 1, 1925.

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The evidence herein held insufficient to establish the rates and basis for depreciation claimed by the taxpayer.

C. H. Pease, C.P.A., for the taxpayer.

B. H. Saunders, Esq., for the Commissioner.

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LOVE

Before MARQUETTE, MORRIS, GREEN, and LOVE.

This appeal is from the determination of a deficiency in income and profits tax for the years 1920 and 1921, in the aggregate sum of $5,913.73. The deficiency arose from the action of the Commissioner in increasing the rate of depreciation taken by the taxpayer for the period prior to the taxable years, resulting in a decrease of invested capital for the taxable years in question.

FINDINGS OF FACT.

The taxpayer is an Illinois corporation with its principal place of business at Chicago. It was engaged in the business of operating a large laundry and had been so engaged for over thirty years. Its assets consisted of the usual plant and equipment of a large modern laundry, all of which was kept in good repair.

A summarized inventory of the assets as of December 31, 1912, as shown upon the books of the taxpayer, is as follows:

Power machinery	$3,198.75
Depreciated	200.00
		$2,998.75
Machinery, wash room, first floor	7,622.05
Depreciated	200.00
		7,422.05
Machinery, second floor	4,564.06
Depreciated	200.00
		4,364.06
Machinery, third floor	6,066.63
Depreciated	200.00
		5,866.63
Ventilating system		355.75
Shafting and pulley	977.50
Belting	642.71
		22,627.45
Baskets and wooden trucks	862.39
Less 25 per cent	215.60
		646.79
Boiler-room tools, etc		44.60
Carpenter tools		6.75
Engineers' tools, etc		243.55
Ironing room spec	273.41
Less	41.01
		232.40
Wash-room furniture		377.00
Steam-heating system	2,811.90
Depreciation	100.00
		2,711.90
Water system	3,107.06
Depreciation	100.00
		3,007.06
Gas system		700.09
Carpentry, lumber, etc		1,918.35
Main office and laundry furnishings	2,296.26
Less 15 per cent	344.39
		1,951.87
Insurance account		818.05
Signs		261.35
Gold and white letters		$52.20
Books, stationery, etc		630.90
Engineers' supplies		162.43
Horses		2,785.00
Barn supplies		481.73
Wagons	$2,718.50
Harness	318.00
Miscellaneous supplies (itemized inventory)	811.60
		3,848.10
		43,507.68

The principal assets had been acquired a number of years prior to the date of the above inventory, but were carried at cost. Some of the assets, as indicated in the above inventory, were depreciated to some extent on December 31, 1912. The taxpayer identified one certain flat-work ironer, the original cost of which in 1904 was $2,600 and was carried on the said 1912 inventory at $2,340, which ironer was turned in on a new ironer at a valuation of $2,000 after 22 years' service. One certain collar ironer and a metal washer had a life of 25 years. Certain shirt ironers, after 21, years' usage, were still in service. Some of the office furniture and fixtures had been in service 30 years and were still in use. The usual life of its Ford trucks was four years, but four of them were still in use after a four-year usage. One G.M.C. truck purchased in 1916 was still in operation. Some of the wagons and horses had lasted 12 to 15 years. There was no evidence of the life of the remaining assets.

The taxpayer claims that the 1912 list of values should be accepted as the March 1, 1913, value upon which depreciation should be based, and depreciation taken down to 1920 at the following rates:

	Per cent.
Laundry machinery and equipment	6 2/3
Power equipment	5
Furniture and fixtures	5
Automobile and delivery equipment	20

For the taxable years, the taxpayer claims depreciation at the following rates:

	1920	1921
Power machinery	14	11
Laundry machinery	10	9
Delivery equipment	27	14
Office equipment	10	10

The Commissioner allowed depreciation for the taxable years, as well as prior years, as follows:

	Per cent.
Laundry machinery, including power equipment	10
Furniture and fixtures	10
Horses, wagons, and harness	15
Automobiles	25

OPINION.

LOVE: In this appeal the taxpayer seeks a low rate of depreciation for the period prior to the taxable years 1920 and 1921, while for these latter years it claimed in its tax returns a much higher rate. The evidence is insufficient to establish the rates or the basis of depreciation claimed by the taxpayer. Although the taxpayer was able to prove that a few of its machines had a longer life than that attributed to them by the Commissioner, there is a total failure of proof as to the remainder of the machinery and other assets. Furthermore, the testimony is strikingly inconsistent with the rates of depreciation claimed by the taxpayer for the same class of assets in the years 1920 and 1921.

The deficiencies are $2,559.43 for 1920 and $3,354.30 for 1921. Order will be entered accordingly.