- 18 -
the accident ($42,576) over what respondent determined to be the
insurance proceeds ($37,000).
Petitioners contend that the disallowance of the
depreciation deductions was erroneous because there was no
"retirement" of the asset within the meaning of section 1.167(a)-
8, Income Tax Regs., which defines retirement as "the permanent
withdrawal of depreciable property from use in the trade or
business". Petitioners argue that because Ruckman, Inc.,
continued to hold title to the truck and Mr. Ruckman intended to
repair it, the truck was not permanently withdrawn from use. As
a result, petitioners contend that Ruckman, Inc., was entitled to
continue taking the same depreciation deductions in 1990 and 1991
as had been taken in previous years, without regard to the
truck's wrecked condition or, impliedly, the insurance proceeds
received.
We disagree. Ruckman, Inc.'s adjusted basis in the truck at
the close of the year preceding the accident was $42,576. As a
consequence of the damage to the truck, Ruckman, Inc., initially
received $37,000 in insurance proceeds in 1990, and later an
additional $11,000, bringing the total received to $48,000 in
that year. Given that Ruckman, Inc., received insurance proceeds
of $48,000 as compensation for damage to a truck with an adjusted
basis of $42,576, on which no repairs had been made or attempted
either in the remaining 7 months in 1990 or in 1991, we conclude
that petitioners were not entitled to the depreciation deductions
Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 NextLast modified: May 25, 2011