- 14 -
capital expenditures that otherwise would have been currently
deductible trade or business expenses. See, e.g., Commissioner
v. Idaho Power Co., 418 U.S. 1 (1974). Unless some other special
rules apply (see, e.g., the subparagraphs of sec. 263(a)(1)), the
taxpayer’s deductions for capital expenditures (if allowable at
all) generally come by way of amortization or depreciation; i.e.,
the capital expenditure is deductible over a period of time.
See, e.g., secs. 167, 168, and 169.
Ordinarily, depreciation or amortization is thought of as a
deduction available to an owner of an asset with respect to that
owner’s basis in the asset. However, a lack of ownership is not
determinative. We described the analysis in Currier v.
Commissioner, 51 T.C. 488, 492 (1968), as follows:
The allowance for depreciation is designed to permit
the person who invests in a wasting asset a means of
recouping, tax free, his investment in that property. To
have the benefit of this deduction the taxpayer has the
burden of proving that he has a depreciable interest in the
property as to which he seeks a depreciation allowance. See
Barnes v. United States, 222 F.Supp. 960 (D. Mass. 1963),
affirmed sub nom. Buzzell v. United States, 326 F.2d 825
(C.A. 1, 1964), and the cases cited therein.
Where the owner of real property enters into a long-
term lease, under the terms of which the lessee is to
10(...continued)
SEC. 263. CAPITAL EXPENDITURES.
(a) General Rule.--No deduction shall be allowed for--
(1) Any amount paid out for new buildings or for
permanent improvements or betterments made to increase
the value of any property or estate. * * *
Page: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 NextLast modified: May 25, 2011