Beach Amusement Corp. v. Commissioner

BEACH AMUSEMENT CORPORATION, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Beach Amusement Corp. v. Commissioner

Docket No. 18288.

United States Board of Tax Appeals

14 B.T.A. 338; 1928 BTA LEXIS 2983;

November 19, 1928, Promulgated

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Rate of depreciation on mechanical amusement devices, determined.

H. Ivor Thomas, Esq., and Irwin C. Louis, Esq., for the petitioner.

Shelby S. Faulkner, Esq., for the respondent.

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MARQUETTE

This proceeding is for the redetermination of a deficiency in income and excess-profits taxes asserted by the respondent for the year 1921 in the amount of $1,606.68. The petitioner alleges that the respondent erred in computing depreciation on certain mechanical devices operated by the petitioner on the basis of a useful life of 10 years instead of upon a useful life of from 3 to 4 years.

FINDINGS OF FACT.

The petitioner is a corporation organized under the laws of California on May 19, 1921. It operates, and operated during the year 1921, various amusement devices on Venice Pier, at Venice, Calif., not far from Los Angeles. Among the devices operated during the year 1921 were 30 so-called Dodgem cars purchased in the taxable year. The total cost of these cars was $20,000, 20 at $700 each, and 10 at $600 each. These cars were not mechanically perfect and gave considerable trouble. In October or November the makers of the cars had perfected a new car and dropped the price of the first car to $400. The Dodgem cars were operated by the petitioner for 4 years at a profit, though with steadily diminishing returns. By that time new and better cars had displaced many of the old cars, and the old ones were used, if at all, only when a number of amusement seekers made it necessary. Such use was only for a few hours per week. In its income and profits-tax return for 1921 the petitioner claimed a deduction from gross income on account of the depreciation of the Dodgem cars, based upon a useful life of 17 1/2 months. The respondent allowed a deduction for depreciation of the cars based upon a useful life of 10 years.

OPINION.

MARQUETTE: The evidence that has been presented to us is not satisfactory. It shows, however, that the Dodgem cars operated by the petitioner did not have a useful life of 10 years as determined by the respondent. We are of opinion that the average useful life of the cars in question was 5 years, and that the petitioner, in computing its net income for 1921 is entitled to a deduction for the depreciation of these cars computed on that basis.

Judgment will be entered under Rule 50.