Arne Thirup and Pauline Thirup v. Commissioner of Internal Revenue

This is a tax case in which Arne and Pauline Thirup, the appellants, claim a $4,755.41 tax credit pursuant to section 38 of the Internal Revenue Code for investments in greenhouses used in their business of growing and selling cut flowers. After concluding that the greenhouses were “buildings” as that term is used in section 48 of the Code, and therefore ineligible for the investment tax credit, the Commissioner of Internal Revenue disallowed the Thirups’ claimed credit, and the Tax Court upheld the Commissioner’s decision. Arne Thirup, 59 T.C. 122 (1972). We reverse.

During 1966, the year for which their tax liability is in dispute, the Thirups conducted their flower business through a sole proprietorship known as Pajaro Valley Greenhouses [hereinafter, “Pajaro Valley” ]. Pajaro Valley’s greenhouses were located near Watsonville, California, but the business sold its cut flowers, mainly roses and carnations, throughout the United States.

In 1966, the appellants spent $79,-841.39 to build one new greenhouse (the “principal” greenhouse) and to improve several existing greenhouses by replacing, with more durable fiber glass, the polyethylene plastic that had previously…