Newark Morning Ledger Co. v. United States, 507 U.S. 546, 8 (1993)

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Cite as: 507 U. S. 546 (1993)

Opinion of the Court

Pet. for Cert. 52a. In order to resolve an issue of substantial importance under the Internal Revenue Code and to settle a perceived conflict,5 we granted certiorari, 503 U. S. 970 (1992).


Section 167(a) of the Code allows as a deduction for depreciation a reasonable allowance for the exhaustion and wear and tear, including obsolescence, of property used in a trade or business or of property held for the production of income. See n. 1, supra. This Court has held that "the primary purpose" of an annual depreciation deduction is "to further the integrity of periodic income statements by making a meaningful allocation of the cost entailed in the use (excluding maintenance expense) of the asset to the periods to which it contributes." Massey Motors, Inc. v. United States, 364 U. S. 92, 104 (1960). The depreciation deduction has been a part of the federal tax system at least since 1909, when Congress recognized that a corporation should calculate its annual net income by deducting from gross income "all losses actually sustained within the year and not compensated by insurance or otherwise, including a reasonable allowance for depreciation of property, if any." Tariff of 1909, 38 Second, 36 Stat. 113. Nothing in the text of the 1909 statute or in the implementing Treasury Decision precluded a depreciation allowance for intangible property.6 This changed in

5 Compare the Third Circuit's ruling in the present case with Donrey, Inc. v. United States, 809 F. 2d 534 (CA8 1987). See also Citizens & Southern Corp. v. Commissioner, 91 T. C. 463 (1988), aff'd, 919 F. 2d 1492 (CA11 1990).

6 According to the Treasury Department, the depreciation deduction "should be the estimated amount of the loss, accrued during the year to which the return relates, in the value of the property in respect of which such deduction is claimed that arises from exhaustion, wear and tear, or obsolescence out of the uses to which the property is put . . . . This estimate should be formed upon the assumed life of the property, its cost value, and its use." Treas. Regs. 31, Art. 4, p. 11 (1909).


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