Southern California Freight Lines, Ltd. v. Commissioner of Internal Revenue

, In computing net income for taxing purposes a taxpayer is permitted 1 “A reasonable allowance for the exhaustion, wear and tear of property used in the trade or business, including a reasonable allowance for obsolescence. * * * ” The petitioner claimed depreciation on its motor equipment for the calendar year 1932 in the sum of $55,412.82, $35,627.28 of which was disallowed by the Commissioner of Internal Revenue. The taxpayer appealed to the Board of Tax Appeals following deficiency notice by the Commissioner of Internal Revenue. The Board of Tax Appeals sustained the Commissioner and the taxpayer petitions this court to review that decision.

The Board of Tax Appeals found-the facts to be substantially as follows:

The petitioner pursued a policy of maintenance and repair, which prolonged the life of its equipment, charging as expense amounts expended for reconditioning. Petitioner generally capitalized complete reconditioning but there is no evidence that such additions were charged to its equipment accounts. A policy of replacement of operating parts, such as batteries, transmissions and motors was followed so that maximum length of service might be obtained from all units,…