Appeal of HAZARD MANUFACTURING CO

Appeal of HAZARD MANUFACTURING CO. Docket No. 1658. Submitted May 12, 1925. Decided October 30, 1925. With proof of tbe life of only a part of tbe depreciable assets, it is impossible for tbe Board to determine error on tbe part of tbe Commissioner in that respect. W. A. Bollinger and O. J. Maguire, Esqs., for the taxpayer. Willis D. Nance, Esq., for the Commissioner. Before Steenhagen, Lansdon, Geeen, and Love. This appeal is from the determination of a deficiency in income and profits taxes of $6,972:72 for 1918 and $8,414.43 for 1920. The taxpayer alleged the following errors: (a) Failure on the part of the Commissioner to give credit for the entire amount of income and “profits taxes assessed and paid for the year ending December 31, 1917; (b) Failure to allow proper amount of depreciation for the year ending December 31, 1918; (c) Erroneous inclusion of tax-exempt Liberty bond interest in determining the taxable net income for the year ending December 31, 1919; (d) Failure to allow proper amount of depreciation for the year ended December 31, 1920. The taxpayer also asked that its profits taxes for the year 1918 be determined under sections 327 and 328 of the Revenue Act of 1918. This relief was not asked in the hearings before the Commissioner. At the hearing before the Board the taxpayer abandoned its assignments of error {a) and (e). FINDINGS OF FACT. The taxpayer is a Pennsylvania corporation, with its principal office at Wilkes-Barre. It manufactures wire rope and wire cables. In the manufacture of its products there is in use a great variety of machinery, some of it heavy machinery, subject to heavy strain and of shorter life than the lighter machinery. ' There are as many as seven units, representing different kinds of heavy machinery, and those seven units, in cost, comprise less than half of the total cost of all machinery. The life of the heavy machinery is from four to seven years. In 1918 taxpayer’s plant ivas' used for making artillery traces and other war material for the Government, and was working overtime, under urgent orders; was forced to use inefficient labor and was subject to many abnormal conditions, which resulted in an abnormal wear and tear of its machinery. The Commissioner allowed depreciation for 1918 at a rate of 10 per cent, and for 1920 at a rate of 5 per cent. The basis for depreciation is not in dispute. DECISION. The determination of the Commissioner is approved. [MAJORITY — Love:] OPINION. Love: It will be noted that the only evidence of life of machinery in taxpayer’s plant is of the heavy machinery, which comprises less than half, in cost, of the whole — how much less than half we are not informed. It is impossible to determine the composite life of all of the machinery with such a paucity of evidence.