Hardinge v. Commissioner

*41 This is a proceeding for the redetermination of deficiencies in income tax of $2,592.12, $200.36, and $3,295.80 for 1923, 1924, and 1925, respectively. The matter in controversy is the action of the respondent in refusing to allow a deduction for the exhaustion of a patent owned by the petitioner.

FINDINGS OF FACT.

The petitioner is the patentee and the sole owner of British patent No. 12719 on an apparatus for crushing, dividing or disintegrating ores or other substances. The patent was granted to the petitioner on June 1, 1907. Under the law in force in Great Britain at the time it was granted, it had a life of 14 years. However, on December 23, 1919, the law was changed so as to extend the life of the patent for two years, thereby giving it a life of 16 years. By order of the High Court of Justice, Chancery Division, dated December 12, 1922, the life of the patent was further extended for four years and three months from its expiration.

In 1913, the second year in*2369 which the patent had been in use, the earnings from it amounted to $21,000, which amount was greater than the earnings for the preceding year. The war came on in 1914 and practically stopped the activities of the business in which the patent was being used.

In determining the deficiencies for 1924 and 1925 the respondent disallowed deductions of $20,422.22 and $30,632.32, respectively, taken as depreciation on patents.

*42 OPINION.

TRAMMELL: The petitioner alleges that the patent had a fair market value of $300,000 on March 1, 1913, and contends that he should be allowed for each of the taxable years here involved 1/14.5 of that amount as a deduction for depreciation. The respondent denies that the patent had the value alleged, or that the petitioner is entitled to the deductions contended for.

In support of a value of $300,000, the petitioner offered his own oral testimony as to three offers made about 1912 to purchase the patent. The best of these offers was for an amount of $300,000. We think this testimony is incompetent and insufficient for establishing value. *2370 Sharpe v. United States,191 U.S. 341. While the evidence shows that earnings from the patent for 1913 were $21,000, which amount was greater than the earnings for the preceding year, we are unable from these facts to determine what the value of the patent was on March 1, 1913.

The petitioner having failed to establish the value of the patent on March 1, 1913, it becomes unnecessary to determine the other question involved.

Judgment will be entered for the respondent.