MacAdam & Foster, Inc. v. Commissioner

8 B.T.A. 967

• Court: United States Board of Tax Appeals
• Decided: October 24, 1927
• Docket: Docket No. 10443
• Status: Published

Opinion

OPINION.

Trttssell:

When machinery is purchased and set up ready for use, the cost installation is naturally a part of the original cost of such machinery and constitutes a capital expenditure, for the machinery is not ready for use until installed and, also the installing of machinery constitutes an improvement. In the case at bar A. E. MacAdam & Co., Inc., purchased, installed, and operated machinery for manufacturing paper boxes and on January 1, 1920, the petitioner took over the plant and continued the operations. The petitioner purchased the machinery as it stood ready for operations and paid the amount which it had cost A. E. MacAdam & Co., Inc., including the original installation cost, less sustained depreciation. Petitioner operated its plant at No. 97 Lexington Avenue for two months, paid rent for the space occupied and then moved to a new location at No. 103 Lexington Avenue. The expense of physically moving the machinery from one building to the other amounted to $3,000, which was not an installation cost or improvement made, but rather a business expense of moving from one location to another. Such an expense is certainly an ordinary and necessary business expense within the meaning of section 234 (a) (1) of the Revenue Act of 1918. Petitioner is entitled to a deduction in the amount of $3,000 from gross income for the year 1920.

Order of redetermmation will be entered v/pon 15 days' notice, pursuant to Bule 50.

Considered by Littleton, Smith, and Love.