Lucila Novoa - Page 23

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               Petitioner argues only that her adjusted basis in the truck            
          should be increased by $500 to reflect petitioner's payment for             
          the truck warranty.  Petitioner argues that petitioner's $500               
          expenditure in 1991 resulted in the creation of an asset having a           
          useful life beyond the end of the 1991 taxable year.  We                    
          understand petitioner to argue that the warranty expenditure is             
          therefore properly chargeable to capital account, thereby                   
          increasing petitioner's adjusted basis by $500, thereby reducing            
          the gain on the sale of the truck from $2,350 to $1,850.                    
               Although this Court has recognized that warranty                       
          expenditures that prolong the life or enhance the value of an               
          asset are capital in nature, see Spritzer v. Commissioner, T.C.             
          Memo. 1988-347 (citing Commissioner v. Lincoln Sav. & Loan                  
          Association, 403 U.S. 345, 353 (1971) and Otis v. Commissioner,             
          73 T.C. 671, 674 (1980), affd. without published opinion 665 F.2d           
          1053 (9th Cir. 1981)), petitioner has neither entered a copy of             
          the warranty into evidence nor testified as to the term and                 
          conditions of the warranty.  Under these circumstances,                     
          petitioner has failed to prove that the warranty she purchased              
          created an asset with a useful life that is properly chargeable             
          to capital account.  Accordingly, we reject petitioner's argument           
          that her adjusted basis be increased by the $500 warranty                   








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