Appeal of FEDERAL HOLDING CO.

Appeal of FEDERAL HOLDING CO. Docket No. 2003. Submitted April 7, 1925; decided May 20, 1925. Arthur L. Jones, G. P. A., for the taxpayer. A. J. Seaton, Esq., for the Commissioner. Before James, Littleton, and Teussell. This is an appeal from a determination by the Commissioner of a deficiency in income and profits taxes of $2,574.54 for the year 1919; $3,109.21 for the year 1920; and $768.63 for the year 1921; a total of $6,452.38.' FINDINGS OE PACT. The taxpayer is an Ohio corporation, engaged in the business of operating a moving-picture theater in Youngstown. It owns a theater building constructed with steel framework and terra-cotta finish. The building is located on leased land on a main thoroughfare of the city, within two blocks of the central square, and in the shopping district. The taxpayer’s building, which was designed exclusively for use as a motion-picture theater, was constructed in 1917 and 1918 at a total cost of approximately $252,000. The structure itself cost approximately $167,000, and will reasonably last for any purpose at least 50 years. The interior construction and ornaments, suitable solely for theater purposes, cost approximately $85,000, and will reasonably last approximately 20 years. In making returns for the years in question, the taxpayer claimed a deduction of 5 per cent on account of depreciation and obsolescence on the total cost of the building. The Commissioner in auditing the returns allowed depreciation at the rate of 2 per cent. These respective depreciation rates are the sole issue before the Board, other than minor adjustments in the invested capital. [MAJORITY] DECISION. The income of the taxpayer should be recomputed by allowing a depreciation rate of 3 per cent. Final determination will be settled on consent or on 10 days’ notice, in accordance with Rule 50.