Moraine Hotel Co. v. Commissioner of Internal Revenue

• Decision Date: 19 August 1930
• Docket Number: No. 4279.,4279.
• Citation: 41 F.2d 725
• Parties: MORAINE HOTEL CO. v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Seventh Circuit

41 F.2d 725 (1930)

MORAINE HOTEL CO. v. COMMISSIONER OF INTERNAL REVENUE.

No. 4279.

Circuit Court of Appeals, Seventh Circuit.

June 19, 1930.

Rehearing Denied August 19, 1930.

Frederick D. Silber, of Chicago, Ill., for petitioner.

Morton K. Rothschild, of Baltimore, Md., for respondent.

Before ALSCHULER, EVANS, and PAGE, Circuit Judges.

EVANS, Circuit Judge.

Petitioner is here to review the rulings of the Board of Tax Appeals respecting an assessment of taxes against it for the years 1920, 1921, and 1922. A single question is involved. Petitioner feels aggrieved at the action of the Commissioner, sustained by the Board of Tax Appeals in making an additional deduction of $31,390.29 for depreciation which occurred during the years 1909-1916. This deduction reduced petitioner's invested capital for these three years involved and increased its taxes. Its excess profits tax was increased, and its depreciation deduction was reduced.

Respondent argues that the amount of depreciation for the period (1909-1916) was an issue of fact upon which the Board heard evidence and made findings which findings are binding on this court unless unsupported by the testimony. Reinecke v. Spalding, 280 U. S. 227, 50 S. Ct. 96, 74 L. Ed. 385.

Petitioner admits that the Board heard evidence and made findings of fact and conclusions of law, admits that such findings are presumptively correct, admits that it has the burden of proving the incorrectness of such findings, and admits that such burden can only be met by clear and persuasive evidence. It contends, however, that the evidence conclusively proved that adequate depreciation charges were in fact made for the period of 1909-1916 (though not so called) and, moreover, petitioner contends the Board made special findings to that effect.

The evidence is not much involved (though we cannot agree with counsel that it is free from conflict or that conflicting inferences might not be drawn from it). Petitioner has since 1900 been conducting a hotel in Chicago. For a few years it was open during the summer only. It has been twice enlarged and for many years has been open the year around. It was at first an unsuccessful venture, but its business steadily improved. Its books of account covering the first ten years have been destroyed. (No adverse inferences should be drawn from this fact in view of satisfactory explanation.) Oral evidence was received which gave a rather complete history of the enterprise for that period. The records, since that date, sustain petitioner's contention that,...