Pope Sanatorium Co. v. Commissioner

*1086OPINION.

The first issue in this appeal relates to the disallowance of depreciation in the amount of $2,231.70 for the year 1918 upon the physical assets of the Pope Sanatorium. In the petition it is alleged that the depreciation claimed by the taxpayer was entirely disallowed for the j^ear in question and that its books have been readjusted to show the following valuation and depreciation deductions:

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We have heretofore found that the buildings had a value of $20,000 and a life of 45 years. This results in an annual depreciation deduction of $444.44. The evidence as to the value of the remainder of the assets upon which depreciation was claimed was limited entirely to the March 1, 1913, value thereof and there is *1087no evidence of the cost of additions thereto. From the evidence introduced by the taxpayer, it is clear that the depreciation upon the last three classes of assets set forth in the tabulation is more or less rapid, and that it is quite probable that in 1918 the taxpayer had on hand only a small portion of the assets on hand on March 1, 1913. The proof is wholly insufficient to serve as a basis for the computation of an allowance for depreciation for the year 1918. For this reason it was deemed unnecessary to itemize the assets which the proof showed to be on hand on March 1,1913.

The second issue relates to the disallowance of depreciation in the amount of $1,552.82 for 1918 upon the capital development account of the Pope Mining Co. There is no evidence before us as to the items, values, or March 1, 1913, value for depreciation purposes of the items comprising the capital development account, and in the absence of such proof the determination of the Commissioner must be sustained.

The third issue relates to the exclusion of $20,001.96 from invested capital of the Pope Sanatorium, it being contended that the same represents the cost of tangible property not carried on the books and which cost was determined by appraisal. No evidence was introduced from which we could determine whether the exclusion was proper or improper. No appraisal was admitted in evidence, no values proven, and in the absence of evidence to support the position of the taxpayer, the determination of the Commissioner is approved.

As a part of the third assignment of error, the taxpayer submits that the Commissioner has improperly computed the invested capital of the Pope Sanatorium by disallowing therefrom $14,179.68, being accounts receivable evidencing surplus loaned to the Pope Mining Co. The evidence established the fact that the sum of $14,179.68 represents a payment by check on the part of the Pope Sanatorium to its two stockholders, Curran Pope and A. T. Pope, and that the latter cashed such checks. Curran Pope and A. T. Pope, with the' proceeds of the checks which they had received from the1 Pope Sanatorium, caused to be placed to the credit of the Pope Mining Co. the sum of $14,179.68. There is no evidence before us from which we could determine that the $14,179.68 in question represented the surplus of the Pope Sanatorium which had been loaned by it to the Pope Mining Co. There may have been oral understandings to that effect, but the record merely discloses payment to the two stockholders of the Pope Sanatorium, which they of their own volition and in their individual capacities caused to be credited to the bank account of the Pope Mining Co.

Order of redetermination will he entered on 10 days’ notice, under Rule 50.