Burnet v. Niagara Falls Brewing Co. - 282 U.S. 648 (1931)
U.S. Supreme Court
Burnet v. Niagara Falls Brewing Co., 282 U.S. 648 (1931)
Burnet v. Niagara Falls Brewing Co.
Argued January 21, 1931
Decided February 24, 1931
282 U.S. 648
1. Under § 234(a)(7) of the Revenue Act of 1918, a brewing company was entitled to a reasonable allowance for obsolescence of tangible property caused by prohibition legislation. Gambrinus Brewery Co. v. Anderson, ante p. 282 U. S. 638. P. 282 U. S. 651.
2 The Court takes judicial notice that, prior to the submission of the Eighteenth Amendment in 1917, more than thirty states had enacted prohibitory laws; that a federal war measure, effective August 10, 1917, required the reduction of the alcoholic content of beer; that the proposed Amendment was ratified by twelve states in the first six months of 1918 and by three more before the expiration of that year; that twenty-one states ratified it in the early part of January, 1919; that, in that month, the Amendment became a part of the Constitution, and that it took effect one year later, January 16, 1920. P. 282 U. S. 651.
3. Obsolescence is not necessarily confined to particular elements or parts of a plant, but may affect the whole of it, and it may result from laws regulating or forbidding the particular use to which the property has been put as well as from other causes. P. 282 U. S. 653.
4. The purpose of the statute in allowing deductions for obsolescence, § 234(a)(7), supra, is to guide the ascertainment of taxable income each year; and, like other tax laws, it should be construed liberally in favor of the taxpayer. P. 282 U. S. 654.
5. The burden of proving the existence and amount of obsolescence may be sustained by such weight of evidence as would reasonably support a verdict for the plaintiff in an ordinary action for money. P. 282 U. S. 654.
6. A resonable approximation of the amount that fairly may be included in the accounts of any year is all that is required. P. 282 U. S. 655.
7. In determining the deduction for obsolescence, the amount probably recoverable from the property at the end of its service, by putting it to another use or by selling it as scrap or otherwise, is to be considered. There is no hard and fast rule that the taxpayer must show that it will be scrapped or cease to be used or useful for any purpose before an allowance may be made for obsolescence. P. 282 U. S. 655.
8. The facts found in this case show that obsolescence of the taxpayer's brewing plant commenced at about the beginning of 1918, and was complete upon the taking effect of prohibition in January, 1920, the taxpayer having been unable to find any profitable use of the property in the manufacture of near-beer or otherwise, and the sums received as rents and from a sale constituting mere salvage. P. 282 U. S. 656.
38 F.2d 217 affirmed.
Certiorari, 281 U.S. 712, to review a judgment of the circuit court of appeals which reversed a decision of the Board of Tax Appeals, 13 B.T.A. 1040, sustaining disallowances in tax returns.