E. W. Edwards & Sons v. Commissioner

3 B.T.A. 889, 1926 BTA LEXIS 2519

• Court: United States Board of Tax Appeals
• Decided: February 19, 1926
• Docket: Docket No. 5318.
• Status: Published

Opinion

OPINION.

Tkussell

: The taxpayer contends that the tunnels were on municipal property; that the municipal officials had no authority to permit the construction of said tunnels; and that the taxpayer had no legal or equitable title to the same and only occupied the city property by license revocable at will.

The right of municipalities to grant franchises and permits for the exclusive use of parts of public streets, whether upon or over or under the surface thereof, has been long and generally recognized; and that such franchises and permits, and the construction necessary for the profitable use of the same, have a capital value which may be continuously used in carrying on business or may be the subject of purchase and sale so long as the franchises continue or the permits are not revoked, is too well established to be seriously questioned. The taxpayer’s tunnels were constructed under municipal ordinances, and so long as such ordinances remain unrepealed the right to use such tunnels and the cost of their construction must be presumed to have a continuing capital value to the taxpayer’s business. The cost of constructing such tunnels should be treated as a capital expenditure, subject to an allowance for exhaustion of the construction cost.