Prudential Overall Supply - Page 17




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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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