Charles B. Towns Hospital v. Commissioner

APPEAL OF CHARLES B. TOWNS HOSPITAL. Charles B. Towns Hospital v. Commissioner Docket No. 2317. United States Board of Tax Appeals 2 B.T.A. 701; 1925 BTA LEXIS 2282; September 30, 1925, Decided Submitted June 16, 1925. *2282 Charles J. Campbell, Esq., for the taxpayer. F. O. Graves, Esq., for the Commissioner. *701 Before JAMES, LITTLETON, SMITH, and TRUSSELL. This appeal is from the determination of a deficiency in income and profits tax for the year 1921 in the amount of $771.16. The taxpayer alleges error on the part of the Commissioner (1) in adding to net income reported $886.95, on the ground that the taxpayer deducted from gross income in its tax return that amount for Federal income tax paid by the corporation during the year 1921; and (2) in disallowing the deduction from gross income of $1,888.63, shown in a schedule attached to the return as "Replacements." FINDINGS OF FACT. The taxpayer is a New York corporation incorporated in the year 1909. All of its capital stock except qualifying shares is owned by Charles B. Towns. The building occupied as a hospital by the taxpayer is also owned by Charles B. Towns. The taxpayer during the year 1921 rented the building from its sole stockholder at an annual rental of $18,000 per annum. At the time, the lease was an oral lease and the rent was paid by the month. The taxpayer was required to keep the furnishings*2283 in as good condition as they were in when it first leased the property. Neither the taxpayer nor Charles B. Towns has ever claimed the deduction from gross income in income-tax returns of depreciation upon the furnishings or equipment of the building. *702 In 1921 the taxpayer paid $940.50 for the remaking of mattresses, $574.61 for linen, and $373.52 for kitchen utensils, a total of $1,888.63. In a schedule attached to its income-tax return for the year 1921, the taxpayer listed the payment of $1,888.63 as "Replacement" and claimed the amount as a deduction from gross income. This deduction was disallowed by the Commissioner upon the theory that it represented a capital expenditure. In its income-tax return for 1921 the taxpayer did not deduct from gross income any amount whatever representing a Federal tax paid by it, as contended by the Commissioner. Not only did it not pay a Federal tax of $886.95 during the year 1921, but the return shows that no such deduction was made. DECISION. The deficiency determined by the Commissioner is disallowed. ARUNDELL not participating.