BURNET, COMMISSIONER OF INTERNAL REVENUE,
v.
NATIONAL INDUSTRIAL ALCOHOL COMPANY, INCORPORATED
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A brewery company claimed a tax deduction for the obsolescence of building space and equipment that became worthless when Prohibition legislation forced it to abandon beer manufacturing in 1919. The Supreme Court affirmed that the company was entitled to the deduction under the Revenue Act of 1918, holding that property loss caused by the enactment of Prohibition legislation qualified as an allowable obsolescence deduction.
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Mr. Justice Butler delivered the opinion of the Court.
The Board of Tax Appeals affirmed the Commissioner’s determination of deficiencies in respondent’s income and profits taxes for fiscal years ending May 31, 1919, and 1920. The taxpayer claimed allowances for obsolescence, Resulting from prohibition legislation, of a part of a build ing. It was denied. 7 B. T. A. 1241. The Court, of Appeals reversed. 38 F. (2d) 718.
The taxpayer, a Louisiana corporation organized in 1911, was engaged in making and selling beer. November 3, 1919, it abandoned that business and commenced the manufacture of near beer which it continued until 1923. For the manufacture of beer the taxpayer had a brewery building and a cellar building having three floors. After prohibition the brewery building and one floor of the cellar building were used in the production of near beer. Two floors of the cellar building and cértain steel and wooden vats thereon formerly used for aging beer were not needed and their use was discontinued on November 3, 1919. The Board found that the vats had no salvage value and held their depreciated cost deductible as obsolescence over the period from December 18, 1917, the date of the submission of the Eighteenth Amendment, to January 16, 1920, the date that prohibition took effect. But it denied any allowance for obsolescence of the two floors on the ground that, while the taxpayer ceased to use them, .there-was nothing-in the record to indicate that the structure was obsolete or becoming so. The Court of Appeals held the evidence ample to support the taxpayer’s contention that after abandonment the two floors possessed no residual or salvage value. The Government has raised here only the question whether under the Revenue Act of 1918; § -234 (a) (4) or (a) (7) a deduction may be allowed for. loss or obsolescence of tangible property caused by prohibition legislation, and concedes that it is not in position to contend that the evidence was not sufficient to establish'obsolescence of the two floors.
The . Government relies on. Clarke v. Haberle Brewing Co., 280. U. S. 384, and Renziehausen v. Lucas, 280 U. S. 387. But we have held in' the Gambrinus case just decided that under § 234 (a) (7) a brewing company is ..entitled to allowance for obsolescence of its building that was caused by the imminence and taking effect of prohibition. That case rules this one.
Judgment affirmed.
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Citator
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Becker v. Anheuser-Busch, Inc., 120 F.2d 403 (8th Cir. 1941)…F. 2d 795. The taxpayers have cited as compelling a contrary conclusion, the following cases in which deductions were sustained: Gambrinus Brewery Co. v. Anderson, 282 U.S. 638, 51 S.Ct. 260, 75 L.Ed. 588; Burnet v. National Ind. Alcohol Co., Inc., 282 U.S. 646, 51 S.Ct. 265, 75 L.Ed. 592; Burnet v. Niagara Falls Brewing Co., 282 U.S. 648, loc. cit. 654, 655, 656, 51 S.Ct. 262, 75 L.Ed. 594; United States Cartridge Co. v. United States, 284 U.S. 511, 52 S.Ct. 243, 76 L.Ed. 431; United States v. Wagner Elec…
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Niagara Mohawk Power Corp. v. The United States, 525 F.2d 1380 (Ct. Cl. 1975)…sured by plaintiff’s period of use. Obsolescence cases cited by plaintiff do not support its position. V. Loewers Gambrinus Brewery Co. v. Anderson, 282 [*1387] U.S. 638, 51 S.Ct. 260, 75 L.Ed. 588 (1931), and Burnet v. National Indus. Alcohol Co., 282 U.S. 646, 51 S.Ct. 265, 75 L.Ed. 592 (1931), involved property used in the manufacture and sale of beer, ales, and porter, which property was rendered obsolete by prohibition. The property was not commercially adaptable for any other use, or, in the Burnet c…
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J. CHR. G. Hupfel Co., Inc. v. Anderson (S.D.N.Y. 1931)…0 S. Ct. 155, 74 L. Ed. 498, as construed in Gambrinus Brewery Co. v. Anderson (C. C. A.) 42 F.(2d) 216. Since then (on February 24, 1931) Gambrinus Brewery Co. v. Anderson, 282 U. S. 638, 51 S. Ct. 260, 75 L. Ed.-; Burnet v. Industrial Alcohol Co., 282 U. S. 646, 51 S. Ct. 265, 75 L. Ed. 592, and Burnet v. Niagara Brewing Co., 282 U. S. 648, 51 S. Ct. 262, 75 L. Ed.-, have been handed down. Plaintiff asks for a rehearing. On the authority of the last three mentioned decisions, the broad interpretation of t…1 / 2
Authorities Cited
- Renziehausen v. Lucas, 280 U.S. 387 (U.S. 1930)
- Nat'l Indus. Alcohol Co. v. Commissioner of Internal Revenue (D.D.C. 1930)