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Commissioner, T.C. Memo. 1958-175, where the question was whether
the cost of work performed on the taxpayer’s coke ovens was
deductible or whether it had to be capitalized. In that case,
oven linings became unserviceable, and the taxpayer had to
replace them periodically. In holding that the cost of replacing
the oven linings had to be capitalized, it was found that the
ovens had a normal life expectancy of 3 to 4 years because after
that time, they “fell into such a state of deterioration” that
they had to be shut down and “substantially rebuilt”. Id. The
Court then held that the substantial rebuilding of the ovens
prolonged their useful lives. The other cases relied on by
respondent are similar to Ruane v. Commissioner, supra.
Generally, in the cases relied on by respondent, the taxpayer
allowed the asset to completely deteriorate and then rebuilt it
resulting in a clearly defined new useful life.
Here petitioners’ towboats (including the engines) do not
completely deteriorate and do not have to be substantially
rebuilt. Petitioners’ towboats are in operating condition and
are operating when they are brought in to have the maintenance
performed, and all of the significant components and systems that
comprise the towboats (including their engines) are in good
working order immediately prior to the performance of the
maintenance. Petitioners do not allow their equipment to become
unserviceable before performing the described procedures.
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