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industrial laundry business, the method treats the expense of
garments and dust control items consistently from year to year,
and the method uses a reasonable approximation of useful life
that is provided for in the regulations of the Code.
Consequently, petitioner argues that it was an abuse of
respondent’s discretion to require petitioner to change its
method of accounting.
Respondent contends that petitioner’s method of accounting
for the cost of the garments and dust control items is not in
conformance with the Code or regulations and that the
capitalization and depreciation of garments and dust control
items will clearly reflect the income of petitioner’s business.
Respondent maintains that the useful life of garments and dust
control items used in petitioner’s business is greater than a
year, and, thus, the cost of the items placed in service should
be capitalized under section 263 and depreciated over the useful
life of each asset class.
Section 263 prohibits deductions for capital expenditures.
See also sec. 1.263(a)-1(a), Income Tax Regs. Capital
expenditures include the cost of acquisition, construction, or
erection of buildings, machinery and equipment, furniture and
fixtures, and similar property having a useful life substantially
beyond the taxable year. Sec. 1.263(a)-2(a), Income Tax Regs.
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