Ingram Industries, Inc. & Subsidiaries - Page 22




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                    condition, may be deducted as an expense * *                      
                    *                                                                 
          Similarly, section 1.263(a)-1(b), Income Tax Regs., provides that           
                    Amounts paid or incurred for incidental                           
                    repairs and maintenance of property are not                       
                    capital expenditures * * *                                        
               Conversely, section 263 provides that no deduction may be              
          taken for amounts expended for permanent improvements or                    
          betterments made to increase the value of property.  See also id.           
          The parties have taken refuge in particular nomenclature that               
          supports their position.  There is no legal question to be                  
          answered here--instead we must decide which party’s labeling is             
          supported by the record.  Respondent uses the term “overhaul”5              
          and petitioners use the terms “routine maintenance”.                        
               The parties’ positions reduced to a concise statement of               
          facts, are as follows:  Petitioners contend that towboats,                  
          including the engines, have an expected useful life of 40 years             
          and the procedures performed are routine maintenance to achieve             
          the expected useful life.  Respondent contends that a towboat               
          engine has a 25,000- to 35,000-hour useful life (here 3 to 4                
          years), and it must be completely overhauled after such use.                




               5 On brief, respondent does not argue that the procedures              
          performed by petitioners’ employees is, by definition, an                   
          overhaul, which includes a complete rebuilding of the engine.               
          Instead, respondent argues that the procedures performed are                
          equivalent in scope to an overhaul.                                         





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Last modified: May 25, 2011