Income Tax Keyed to Freeland
Gross Income: The scope of Section 61
The Exclusion of Gifts and Inheritances
Gain From Dealings in Property
Discharge of Indebteedness
Damages and Related Receipts
Assignment of Income
Income Producing Entities
Welch v. Helvering 290 U.S. 111, 54 S. Ct. 8, 78 L. Ed. 212, 1933 U.S.
Midland Empire Packing Co. v. Commissioner 14 T.C. 635, 1950 U.S. Tax Ct.
INDOPCO, Inc. v. Commissioner 503 U.S. 79,112 S. Ct. 1039, 117 L. Ed. 2d 226, 1992 U.S.
Morton Frank v. Commission 20 T.C. 511, 1953 U.S. Tax Ct.
Exacto Spring Corporation v. Commissioner 196 F.3d 833, 1999 U.S. App. 99-2 U.S. Tax Cas. (CCH) P50,964; 84 A.F.T.R.2d (RIA) 6977
Harolds Club v. Commissioner 340 F.2d 861, 1965 U.S. App. 65-1 U.S. Tax Cas. (CCH) P9198; 15 A.F.T.R.2d (RIA) 241
Rosenspan v. United States 438 F.2d 905, 1971 U.S. App. 71-1 U.S. Tax Cas. (CCH) P9241; 27 A.F.T.R.2d (RIA) 707
Andrews v. Commissioner 931 F.2d 132, 1991 U.S. App. 91-1 U.S. Tax Cas. (CCH) P50,211; 67 A.F.T.R.2d (RIA) 881
Starr 274 F.2d 294, 1959 U.S. App. 60-1 U.S. Tax Cas. (CCH) P9191; 5 A.F.T.R.2d (RIA) 572
Hill v. Commissioner 181 F.2d 906, 1950 U.S. App. 50-1 U.S. Tax Cas. (CCH) P9310; 39 A.F.T.R. (P-H) 435
Coughlin v. Commissioner 203 F.2d 307, 1953 U.S. App. 53-1 U.S. Tax Cas. (CCH) P9321; 43 A.F.T.R. (P-H) 672
Sharp v. United States 199 F. Supp. 743, 1961 U.S. Dist. 61-2 U.S. Tax Cas. (CCH) P9774; 8 A.F.T.R.2d (RIA) 5812
Simon v. Commissioner 68 F.3d 41, 1995 U.S. App.95-2 U.S. Tax Cas. (CCH) P50,552; 76 A.F.T.R.2d (RIA) 6911
Deductions for Profit-Making, Nonbusiness Activities
Deductions Not Limited to Business or Profit-Seeking Activities
Restrictions on Deductions
Deductions for Individuals Only
Fundamental Timing Principles
How Ineluctable is the integrity of the Taxable Year?
Capital Gains and Losses
Characterization on the Sale of Depreciable Property
Deductions Affected by Characterization Principles
The Interrelationship of Timing and Characterization
Disallowance of Losses
Nonrecognition Provisions
Computations
Income Tax > Income Tax Keyed to Freeland > Business Deductions
Simon v. Commissioner
Citation. Simon v. Commissioner, 68 F.3d 41, 95-2 U.S. Tax Cas. (CCH) P50,552, 76 A.F.T.R.2d (RIA) 6911 (2d Cir. Oct. 13, 1995)
CitationSimon v. Commissioner, 68 F.3d 41, 1995 U.S. App. LEXIS 28823, 95-2 U.S. Tax Cas. (CCH) P50,552, 76 A.F.T.R.2d (RIA) 6911 (2d Cir. Oct. 13, 1995)
Brief Fact Summary. The Simons purchased two antique bows for use as musicians. They attempted to deduct depreciation of the bows because of the wear and tear from the use in concerts. These bows retained value after they could no longer be used because they were collector's items.
Synopsis of Rule of Law. In order to be considered depreciable property it must have a determinable useful life.
First, useful life is measured by the use in a taxpayer's business, not by the full abstract economic life of the asset in any business.
Facts. The Simons, Petitioners, purchased two violin bows made in the 19th century by Francois Tourte, a renowned bow maker. They were purchased in 1985 and were virtually unused at that time. A violin bow will "play out" eventually and no longer be useful. However, the Tourte bows retain value as collector's items. The bows at issue were appraised in 1990 at $45,000 and $35,000. At that time they had deteriorated since their purchase by Petitioners. Petitioners paid $30,000 and $21,500 for the bows. Petitioners used the bows for their trade as musicians and in 1989, the tax year at issue, they played in four concerts per week. They claimed depreciation on the bows in the amount of $6,300 and $4,515. The Tax Court allowed the deductions, and the Commissioner appealed.
Issue. Do the bows have a "determinable useful life" that will allow for the depreciation deduction?
Held. Circuit Judge Winter issued the opinion for the United States Second Circuit Court of Appeals in holding for Petitioners and finding that the bows did not have to have a "determinable useful life" to qualify for a depreciation deduction, and were deductible.
Dissent. Judge Oakes issued a dissenting opinion arguing that Congress did not intend to do away with the "determinable useful life" test and that the ruling will be abused by businesses.
Discussion. The Court of Appeals found that the test is whether property will suffer exhaustion, wear and tear, or obsolescence in its use by a business. The Court points out that the law was intended by Congress to encourage economic in business property. The Commissioner argued that businesses could use the law to purchase wasteful antiques. However, the Court found that the test articulate should prevent abuse by businesses because it requires demonstrable wear and tear in it business
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