- 39 -
wages paid construction workers, are to be treated as part of the
cost of acquisition of a capital asset.” Id. at 13. The Court
concluded that requiring the taxpayer to capitalize its
depreciation would maintain tax parity between it and another
taxpayer who retained an independent contractor to construct the
improvements and additions for it. In the latter case, the Court
stated, the depreciation on the equipment used by the independent
contractor would be part of the cost that the contractor charged
on the project. The Court believed it unfair to allow a taxpayer
to deduct the cost of constructing its facility if it has
sufficient resources to do its own construction work, while
requiring another taxpayer without such resources to capitalize
its cost including the depreciation charged by the contractor.21
See id. at 14. The Court expressed no opinion as to the fact
that the taxpayer in the Idaho Power Co. case had been regularly
and routinely improving its facilities throughout most of its
long existence, nor that these improvements had for the most part
been made by its employees. See id.; see also the opinions of
the lower courts at Idaho Power Co. v. Commissioner, 477 F.2d
688, 690 (9th Cir. 1973); Idaho Power Co. v. Commissioner, T.C.
Memo. 1970-83.
21 The amicus for FHLMC would limit the Supreme Court’s tax
parity rationale to cases of self-created assets. We read
nothing that would so limit that rationale.
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