Indiana Stove Works v. Commissioner

*1010OPINION.

The petitioner takes the position that since the contract in question covered both capital and expense items, segregation of those items was its right under the statute, and the segregation made by Zurstadt, its vice president, should be accepted until found to be erroneous. We are unable to agree with this contention. It will suffice to say that the Commissioner having disallowed the deduction claimed on account of repairs, the burden is on the petitioner to show that he erred if we are to allow the deduction.

It is probable that some of the expenditures made pursuant to the contract and disallowed as deductions by the Commissioner were for ordinary and necessary repairs, the cost of which is deductible. Appeal of Illinois Merchants Trust Co., Executor, 4 B. T. A. 103. But in order that we may allow a deduction on account thereof, we must be apprised of those items constituting repairs, and also of their cost.

The petitioner urges that all items not capitalized must necessarily be items of repair. That would unquestionably follow if we were to assume that Zurstadt had been unerring in his determination with respect to the proper allocation of the disputed items. The evidence, however, indicates that practically all of the items in controversy were additions and replacements and had a life of several years.

In view of the fact, therefore, that neither the items classed as repairs nor the cost thereof are disclosed by the record, we can only approve the respondent’s determination in disallowing the deduction claimed on account thereof. Appeal of Modesto Lumber Co., 5 B. T. A. 598.

*1011The petitioner’s contention that the respondent erred in reducing its invested capital by assuming and deducting from available earnings for 1920, an obligation to pay a tentative tax for the year 1920, which resulted in reducing the amount of earnings available for dividends, is sustained. See Appeal of L. S. Ayers & Co., 1 B. T. A. 1135, and upon that authority we disapprove the respondent’s determination in regard thereto.

Judgment will he entered on Id days' notice, under Bule 50.