Rising Sun Brewing Co. v. Commissioner

RISING SUN BREWING COMPANY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Rising Sun Brewing Co. v. Commissioner Docket No. 13165. United States Board of Tax Appeals 22 B.T.A. 826; 1931 BTA LEXIS 2057; March 19, 1931, Promulgated *2057 1. Loss sustained on the abandonment of bottling machinery allowed as a deduction. 2. Loss deduction claimed on a building disallowed in the absence of evidence proving loss of useful value. R. M. O'Hara, Esq., and Alex M. Hamberg, Esq., for the petitioner. Arthur Carnduff, Esq., for the respondent. ARUNDELL *826 Proceeding for the redetermination of a deficiency of $3,290.38 in income tax for 1920. The issues are whether losses were sustained on the abandonment of certain bottling equipment and the building in which it was housed. FINDINGS OF FACT. The petitioner, a New Jersey corporation, was engaged in the manufacture and sale of beer or near beer from prior to 1918 to 1927, during which year it ceased operating. It used substantially the same facilities in producing near beer as it used in manufacturing beer. *827 Among the facilities owned and used by the petitioner prior to the fall of 1920 was a building, 100 feet by 250 feet, of brick and hollow tile construction, erected in 1917 and known as the bottling building, and washing, filling, crowning, Pasteurizing, labeling, and bottle-conveying machinery, operated*2058 therein, and known as bottling machinery. During 1920 the bottling machinery became obsolete. In the fall of 1920 the petitioner erected a new building and installed therein up-to-date bottling and loading equipment. The new bottling plant was placed in operation before the close of 1920 and enabled petitioner to reduce its bottling expenses one-half. The petitioner never used the old bottling machinery after the new plant was put in operation. In 1920 there was no market for the old bottling machinery. Some of such machinery was cemented to the floor of the building and the salvage value of all of it was less than dismantling and removal costs. The petitioner has made little or no use of the old building since the erection of the new one. It has never been dismantled and still remains. The depreciated cost of the old bottling machinery and building on January 1, 1920, was $23,707.79 and $16,296.21, respectively. OPINION. ARUNDELL: The evidence here convinces us that the abandonment of the bottling equipment in favor of more efficient machinery resulted in a loss to petitioner. There was no market for the abandoned equipment and its junk value was less than it*2059 would have cost to dismantle and remove it. The loss sustained was $23,707.79, representing the depreciated cost of the property on January 1, 1920. In recomputing the deficiency under Rule 50 an adjustment should be made for any allowance made by the respondent for depreciation in the taxable year. The testimony offered in support of the claimed loss of useful value for the building is not convincing. In 1920 the building was only three years old and, having been constructed of brick and hollow tile, was probably in excellent physical condition. It still remains and is still owned by petitioner. It is true it was used little, if at all, after 1920 by petitioner, but proof of such fact is not sufficient to establish a complete loss. The location of the plant was not testified to and it may well be that the building might have been sold, leased, or otherwise put to profitable use. Certainly a showing of lack of use by the owner is not sufficient to establish a deductible loss of a practically new building on facts so meager as appear in this record. Decision will be entered under Rule 50.