*3087 Ordinary and necessary business expenses determined and allowed as deductions.
*1223 Petitioner asks a redetermination of a deficiency of $5,736.20 in income tax for the year 1921, and as grounds therefor alleges that the respondent erred in (1) disallowance of the sum of $429.18 expended by petitioner for traveling expenses on professional business trips, and (2) disallowance of the sum of $9,131.15 representing expenditures made by petitioner in repairing and remodeling a building to suit his purposes for a residence and physician's office. The latter were considered capital expenditures by the respondent, while the petitioner contends they were ordinary and necessary business expenses in the nature of repairs.
FINDINGS OF FACT.
Petitioner is a physician and surgeon, with his office and residence at No. 8 East 68th Street, New York City. The specializes in urology *1224 and kindred subjects, is a professor and attending surgeon at Columbia University, and consulting surgeon at St. Luke's and Roosevelt Hospitals, *3088 and others. During the taxable year he was a member of the American College of Surgery, Governor and Member of the Executive Council, and as such he attended meetings of the association in other cities. He was called in consultation at Bridgeport, Conn., Washington, D.C., Albany, N.Y., and other places during the year requiring expenditures for traveling and other necessary business expenses.
In April, 1921, petitioner purchased for $200,000 a five-story residence located at No. 8 East 68th St., New York City, for the purpose of converting a part into offices suitable for his professional needs and to use the remainder for residential purposes for himself and family. The alterations, repairs and furnishings contemplated were extensive and expensive and were completed at a cost of $71,693.27. This covers both the residential and business portions of the house.
Formerly it had been used as a residence and in order to remodel it for petitioner's purposes, the whole first floor was altered. The dining room and butler's pantry were removed from the first to the second floor, and the entire first floor was converted into a physician and surgeon's offices consisting of entrance*3089 hall, reception room, consulting room, two surgeries and toilet rooms. Petitioner expended $3,617.34 in the year 1921 for the purpose of decorating the walls and ceilings of the part of the building used exclusively for business purposes and which decorations are renewed yearly with respect to the premises. He also expended $495.50 in the year 1921, for repairs to office furniture, and $1,185 for removing old book cases from his former office and repairing same, and $150 for removing and resetting a basin, tray, and toilet.
In the year 1921 petitioner expended $429.18 for reilroad fare, hotel accommodations and meals in attending meetings of various medical associations and in making trips for consultation purposes.
OPINION.
MILLIKEN: Petitioner made extensive alterations, renovations and repairs in 1921 to the building which he purchased, the total of the expenditures for the purposes aforesaid being $71,693.27. A part of the sum so expended is claimed by petitioner as a deduction for ordinary and necessary business expenses in the year. Numerous bills for work done and paid for were received in evidence and an attempt made to allocate the money expended on a percentage*3090 of the building used for business purposes and that used as a residence. It is not possible to lay down a hard and fast rule for the determination *1225 of whether an expenditure is a capital one or is chargeable against the operating income of the year. We have heretofore had occasion to consider the difference between repairs, betterments, replacements, and alterations to make property adaptable to a different use, and in the case of , we stated:
* * * In determining whether an expenditure is a capital one or is chargeable against operating income, it is necessary to bear in mind the purpose for which the expenditure was made. To repair is to restore to a sound state or to mend, while a replacement connotes a substitution. A repair is an expenditure for the purpose of keepting the property in an ordinarily efficient operating condition. It does not add to the value of the property, nor does it appreciably prolong its life. It merely keeps the property in an operating condition over its probable useful life for the uses for which it was acquired. Expenditures for that purpose are distinguishable from*3091 those for replacements, alterations, improvements or additions which prolong the life of the property, increase its value, or make it adaptable to a different use. The one is a maintenance charge, while the others are additions to capital investment which should not be applied against current earnings. We have already pointed out this distinction in the , in which we held that expenses properly chargeable to capital account include those which are incurred in the original construction of the work and in the subsequent enlargement and improvement thereof, and quoted the following from :
"Theoretically, the expenses chargeable to earnings include the general expenses of keeping up the organization of the company, and all expenses incurred in operating the works and keeping them in good condition and repair; whilst expenses chargeable to capital include those which are incurred in the original construction of the works, and in the subsequent enlargement and improvement thereof."
We have set forth in our findings of fact the*3092 extent to which we believe the evidence warrants a deduction for expenditures made in the year in question as an ordinary and necessary business expense. There should, therefore, be allowed as a deduction to petitioner, for the year 1921, the sum of $5,411.84.
In brief of counsel for petitioner, we are asked to find that petitioner is entitled to a decution of depreciation for a given sum on capital assets used in the petitioner's trade or business. The petition filed in this case raises no issue concerning depreciation and we therefore make no finding with respect thereto.
The expenses incurred and paid in attending medical associations, as well as others relating to trips for consultation work, should be allowed as deductions. See .
Judgment will be entered under Rule 50.