Alacare Home Health Services, Inc. - Page 7

                                        - 7 -                                         
          clearly reflects income.  See Cincinnati, New Orleans & Tex. Pac.           
          Ry. Co. v. United States, supra at 567-578; Union Pac. R.R. Co.             
          v. United States, supra at 1347-1348.  The Court of Claims in               
          Cincinnati relied on our prior rejection of the Commissioner’s              
          contention that section 263 is dispositive without considering              
          section 446:                                                                
                    We reject as without merit respondent’s contention                
               that section 263 of the Code is in and of itself                       
               dispositive of the issue before us.  By requiring the                  
               capitalization of amounts “paid out for new buildings                  
               or for permanent improvements or betterments made to                   
               increase the value of any property,” such section begs                 
               the very question we are asked to answer.  We are                      
               satisfied that, under the circumstances involved                       
               herein, sections 263 and 446 are inextricably                          
          Cincinnati, New Orleans & Tex. Pac. Ry. Co. v. United States,               
          supra at 568-569 (quoting Fort Howard Paper Co. v. Commissioner,            
          49 T.C. 275, 283-284 (1967)).  The Court of Claims in Cincinnati            
          also said that “The determinative question, therefore, is not               
          what is the useful life of the asset in question, although that             
          inquiry is relevant, but does the method of accounting employed             
          clearly reflect income.”  Id. at 568.  The court noted that the             
          disputed items were a minute fraction of the taxpayer’s net                 
          income, yearly operating expenses, and yearly depreciation                  
          deduction.  See id. at 571.  The court concluded that the ICC’s             
          minimum expensing rule was in accordance with generally accepted            
          accounting principles, see id. at 569-570, and that the                     
          taxpayer’s financial statements clearly reflected income, see id.           

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  Next

Last modified: May 25, 2011