Simon v. Comm'r of Internal Revenue

• Citation: 103 T.C. 247,103 T.C. No. 15
• Decision Date: 22 August 1994
• Docket Number: No. 4817–92.,4817–92.
• Parties: Richard L. SIMON and Fiona Simon, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
• Court: United States Tax Court

103 T.C. 247

103 T.C. No. 15

Richard L. SIMON and Fiona Simon, Petitioners,

v.COMMISSIONER OF INTERNAL REVENUE, Respondent.

No. 4817–92.

United States Tax Court.

Aug. 22, 1994.

Arthur Pelikow, New York City, Norman Gold, Chicago, IL, and Milton Sherman, New York City for petitioners.

Pamela L. Cohen, St Louis, MO, Paulette Segal, New York City, and Kevin Kilduff, Canton, MA (specially recognized), for respondent.

Ps claimed depreciation deductions under the accelerated cost recovery system (ACRS), sec. 168, I.R.C., on two 19th-century violin bows that Ps actively, regularly, and routinely used in their trade or business as full-time professional violinists. R disallowed these deductions. R argues that the bows are depreciable under ACRS only if Ps prove the useful life of each bow under the law that applied before ACRS. R also argues that the useful lives of the bows are indeterminable because the bows are treasured works of art that appreciate in value and for which it is impossible to determine useful lives.

Held: Ps are entitled to depreciation deductions for their violin bows under ACRS because the bows are“ recovery property” under sec. 168(c)(1), I.R.C.; that is, the bows: (1) Are tangible personal property, (2) were placed in service after 1980, (3) are used in Ps' trade or business, and (4) suffer substantial wear and tear as a result of their use in Ps' trade or business.

LARO, Judge:

Richard Simon and Fiona Simon petitioned the Court for a redetermination of respondent's determinations in a notice of deficiency issued to them on December 11, 1991. In the notice respondent determined a $21,198 deficiency in petitioners' 1989 Federal income tax and a $4,240 addition thereto under section 6662(a) of the Internal Revenue Code in effect for 1989. Unless otherwise indicated, section references are to the Internal Revenue Code in effect for 1985. See infra note 3. Rule references are to the Tax Court Rules of Practice and Procedure.

Due to concessions by the parties, the sole issue for decision is whether petitioners are entitled to deduct depreciation claimed under the accelerated cost recovery system (ACRS) for the year in issue.¹ Petitioners claimed depreciation on two 19th-century violin bows that they used in their trade or business as full-time professional violinists. As discussed below, we hold that petitioners may depreciate their violin bows during the year in issue.

FINDINGS OF FACT

Some of the facts have been stipulated and are so found. The stipulations and attached exhibits are incorporated herein by this reference. For the taxable year in issue, petitioners were husband and wife and filed a 1989 Form 1040, U.S. Individual Income Tax Return, using the status of “Married filing joint return”. When they filed their petition in this case, petitioners resided in New York, New York.

Petitioners' Backgrounds

Richard Simon started playing and studying the violin in 1943, at the age of 7. In 1945, he was awarded a full scholarship to the Manhattan School of Music. He studied the violin there through college and received a bachelor of music degree in 1956. Following his graduation, Richard Simon pursued a master's degree in music by taking additional courses at the Manhattan School of Music and Columbia University. Throughout his education, Richard Simon studied the violin under many renowned musicians.

In 1965, Richard Simon joined the New York Philharmonic Orchestra (Orchestra) and began playing in its first violin section. In 1981, he joined and began playing with the New York Philharmonic Ensembles (Ensembles) (hereinafter, the Orchestra and the Ensembles are collectively referred to as the Philharmonic). Since 1965, Richard Simon has maintained two careers, one as a player with the Orchestra (and later with the Philharmonic) and the second as a soloist, chamber music player, and teacher.

Fiona Simon began playing and studying the violin at the age of 4. Her musical studies included courses at Purcell School in London from 1963–71 and at the Guildhall School of Music from 1971–73. Throughout her career, Fiona Simon studied the violin with renowned musicians.

In 1985, Fiona Simon joined the Philharmonic and began playing in its first violin section. Since 1985, Fiona Simon has maintained two careers, one as a full-time player with the Philharmonic and a second as a soloist, chamber music player, teacher, and free-lance performer.

During the year in issue, petitioners were both full-time performers with the Philharmonic, playing locally, nationally, and internationally in the finest concert halls in the world. In 1989, petitioners performed four concerts per week with the Philharmonic, playing over 200 different works, and attended many rehearsals with the Philharmonic that were more demanding and more time-consuming than the concerts. Petitioners also carried out the busy schedules connected with their second careers.

Construction of a Violin Bow

A violin bow consists of a flexible wooden stick, horsehair, a frog, and a ferrule (screw). The stick, which varies in thickness, weight, and balance, is the working part of the bow and is an integral part in the production of sound through vibration. It is designed so that horsehair can be stretched between its ends.

The horsehair is a group of single strands of hair that come from the tails of Siberian horses. A hatchet-shaped head holds one end of the horsehair, and the other end is attached to a frog. The frog, which is inserted into the stick, is a movable hollow piece by which the bow is held. The frog has an eyepiece on the end that catches the screw. The screw is the small knob at the end of the bow that is adjusted to tighten or loosen the horsehair in order to change the tension on the horsehair. The horsehair is the part of the bow that touches the violin strings. Rosin is applied to the horsehair to supply the frictional element that is necessary to make the violin strings vibrate.

Old violins played with old bows produce exceptional sounds that are superior to sounds produced by newer violins played with newer bows. The two violin bows in issue were made in the 19th century by François Xavier Tourte (1747–1835). François Tourte is considered the premier violin bow maker. In particular, he is renowned for improving the bow's design. (Hereinafter, the two bows in issue are separately referred to as Bow 1 and Bow 2, and are collectively referred to as the Tourte bows.)

Purchase of the Tourte Bows

On November 13, 1985, petitioners purchased Bow 1 for $30,000; the bow was purchased from Moes & Moes, Ltd., a dealer and restorer of violins and violin bows. On December 3, 1985, petitioners purchased Bow 2 from this dealer for $21,500. The sticks, frogs, and screws were originals of François Tourte at the time of each purchase. No cracks or other defects were apparent in the sticks at the time of each purchase. The frogs and screws, however, were not in playable condition. Therefore, petitioners replaced them.

Petitioners acquired the Tourte bows for regular use in their full-time professional employment as violinists. Petitioners purchased the Tourte bows for their tonal quality, not for their monetary value.² In the year of acquisition, petitioners began using the Tourte bows with the original sticks in their trade or business as full-time professional violinists. Petitioners continued to use the Tourte bows with the original sticks during the year in issue.

Depreciation Deductions Claimed for the Tourte Bows

On their 1989 Form 1040, petitioners claimed a depreciation deduction of $6,300 with respect to Bow 1 and $4,515 with respect to Bow 2; these amounts were in accordance with the appropriate ACRS provisions that applied to 5–year property. See sec. 168(b)(1).³ Respondent disallowed petitioners' depreciation deduction in full and reflected her disallowance in the notice of deficiency at issue here.

Conditions Affecting the Wear and Tear of Violin Bows

Playing with a bow adversely affects the bow's condition; when a musician plays with a bow, the bow vibrates up, down, sideways, and at different angles. In addition, perspiration from a player's hands enters the wood of a bow and ultimately destroys the bow's utility for playing. Cracks and heavy-handed bearing down while playing certain pieces of music also create wear and tear to a bow. A player who has a heavy hand may cause the stick to press against the horsehair; in turn, this may cause the bow to curve and warp. The appendix illustrates the wear and tear that was suffered by a violin bow that was used for 20 to 25 years.⁴ Petitioners' use of the Tourte bows during the year in issue subjected the bows to substantial wear and tear.

Frequent use of a violin bow will cause it to be “played out”, meaning that the wood loses it ability to vibrate and produce quality sound from the instrument. From the point of view of a professional musician, a “played out” bow is inferior and of limited use. The Tourte bows were purchased by petitioners, and were playable by them during the year in issue, only because the Tourte bows were relatively unused prior to petitioners' purchase of them; the Tourte bows had been preserved in pristine condition in collections. ⁵ At the time of trial, the condition of the Tourte bows had deteriorated since the dates of their purchase. Among other things, the sticks on the Tourte bows were worn down.

Value of the Tourte Bows

On November 21, 1985, Bow 1 was appraised for insurance purposes as having a fair market value of $35,000. On December 3, 1985, Bow 2 was appraised for insurance purposes as having a fair market value of $25,000. Petitioners obtained both appraisals from Moes & Moes, Ltd.

In 1994, at the time of trial, the Tourte bows were insured with the Philharmonic for $45,000 and $35,000, respectively. These amounts are based on an appraisal dated May 14, 1990, from Yung Chin Bowmaker, a restorer and dealer of fine bows. The record does not indicate...