Prudential Overall Supply - Page 18




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               Petitioner argues that its garments and dust control items             
          are materials and supplies that are consumed within the year that           
          they are placed in service, and thus the cost of these items are            
          ordinary and necessary to the operation of its industrial laundry           
          business and are properly expensed when placed in service under             
          section 162 and section 1.162-3, Income Tax Regs.                           
               Supplies used in the taxpayer’s trade or business are among            
          the items included in business expenses.  Sec. 1.162-1(a), Income           
          Tax Regs.  Section 1.162-3, Income Tax Regs., provides that                 
          taxpayers carrying materials and supplies on hand should include            
          in expenses the charge for materials and supplies only in the               
          amount that they are actually consumed and used in operation                
          during the taxable year for which the return is made.                       
               Petitioner argues, in the alternative, that, even if                   
          required to capitalize the cost of the garments and dust control            
          items under section 263, the useful life of the garments and dust           
          control items was less than 1 year or not substantially in excess           
          of 1 year and would be fully depreciable in the year placed in              
          service.                                                                    
               Section 167(a) generally allows as a depreciation deduction            
          a reasonable allowance for the exhaustion, wear and tear, and               
          obsolescence of property used in a trade or business.  Any                  
          reasonable and consistently applied method of computing                     
          depreciation may be used or continued in use.  Sec.                         






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Last modified: May 25, 2011