Hardwick Realty Co. v. Commissioner of Internal Revenue
| Decision Date | 03 December 1928 |
| Docket Number | No. 63.,63. |
| Citation | 29 F.2d 498 |
| Parties | HARDWICK REALTY CO., Inc., v. COMMISSIONER OF INTERNAL REVENUE. |
| Court | U.S. Court of Appeals — Second Circuit |
Brison Howie, of New York City (Frank S. Bright, of Washington, D. C., of counsel), for petitioner.
Mabel Walker Willebrandt, Asst. Atty. Gen., and Sewall Key and Millar E. McGilchrist, Sp. Asst. Attys. Gen. (C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and Shelby S. Faulkner, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., of counsel), for respondent.
Before MANTON, L. HAND, and SWAN, Circuit Judges.
SWAN, Circuit Judge (after stating the facts as above).
The taxing statute involved in this controversy is the Revenue Act of 1918 (40 Stat. 1057). By section 230 corporations are taxed upon their "net income"; by section 232 this term is declared to mean the gross income as defined in section 233, less the deductions allowed by section 234; by section 233 the definition of "gross income" is referred back to section 213, and is found to include "gains, profits, and income derived from * * * sales * * *"; and by section 202 is provided the basis for determining such gains, as follows:
"Sec. 202(a) That for the purpose of ascertaining the gain derived or loss sustained from the sale or other disposition of property, real, personal, or mixed, the basis shall be * * * (2) In the case of property acquired on or after that date March 1, 1913, the cost thereof. * * *"
Section 234 provides for deductions, and among others for an allowance for depreciation:
* * *"
It is the contention of the taxpayer that, unless there is taxable income exclusive of deductions for depreciation, the above-quoted provisions of section 234 are inapplicable, and that only to the extent that a taxpayer has actually received credit for depreciation by a reduction of taxable income can depreciation allowances be used in figuring the gain derived from a sale of property. As applied to the facts at bar, appellant concedes that depreciation allowances to the extent of $5,100, the amount of income upon which it would have been taxable prior to the year 1920, if depreciation had not been deducted, may be subtracted from the cost of the property in order to determine the amount of its gain from the sale in 1920; but it denies that any greater sum may be considered as depreciation. In the opinion of a majority of the court, not only does this contention misconceive the theory upon which depreciation is used in computing the gain derived from a sale of property, but it has been definitely determined adversely to the appellant by the Supreme Court in United States v. Ludey, 274 U. S. 295, 47 S. Ct. 608, 71 L. Ed. 1054.
In that case the taxpayer sold in 1917 certain oil properties purchased in prior years. The original cost was approximately $96,000, of which $31,000 was the cost of equipment and $65,000 the cost of the oil reserves. To compute gain derived from the sale of the properties, the Commissioner deducted some $10,000 on account of depreciation of the equipment and some $32,000 on account of depletion through the removal of oil after March 1, 1913. The aggregate for depreciation and depletion claimed by Ludey in his income tax returns for the years 1913 to 1916, inclusive, and allowed, was only $5,000. He insisted that more could not be deducted from the original cost in making the return of his 1917 income. The court held otherwise, saying (page 303 of 274 U. S. 47 S. Ct. 611):
...
To continue reading
Request your trial
-
P. Dougherty Co. v. Commissioner of Internal Revenue
...deduction in his tax return for the year when the depreciation occurs, and may not take it in a later year. See Hardwick Realty Co. v. Commissioner, 2 Cir., 29 F.2d 498, 500. Hence we think the phrase should be read as equivalent to `devoted to the trade or business'; that is to say, that p......
-
Samson v. United States
...been reached by judicial decision. United States v. Ludey, 1927, 274 U.S. 295, 47 S.Ct. 608, 71 L.Ed. 1054. 4 Hardwick Realty Co., Inc. v. Commissioner, 2 Cir., 1928, 29 F.2d 498. 5 Paragraph "Ninth," subparagraph "b." of the will of Gustavus Sidenberg "Ninth: — I give and bequeath all the ......
-
Tolins v. Commissioner
... ... Petitioners filed their return with the district director of internal revenue for the lower Manhattan District, New York City. Joseph Tolins is ... conveyed both 15 percent interests to Goldhirsch and Jostern Realty Co., Inc., respectively ... Each third mortgage provided ... 226, 1 B. T. A. 605; Louis Titus Dec. 813, 2 B. T. A. 754, 758; Hardwick Realty Co. Dec. 2724, 7 B. T. A. 1108, 1110, affirmed 1929 CCH D-9026 29 ... ...
-
Helvering v. State-Planters Bank & Trust Co.
...depreciation may not have been deducted at all. United States v. Ludey, 274 U.S. 295, 47 S.Ct. 608, 71 L.Ed. 1054; Hardwick Realty Co. v. Com'r, 2 Cir., 29 F.2d 498. There is just as much reason to say that, up to the original cost, the sale price of property is a return of capital as to sa......