Securing roof ornaments was a capital expenditure
Article Abstract:
The Court of Appeals for the Federal Circuit concurred with a lower court in the 'Swig Investment Co.' case that the replacement of cornices and parapets used as a roof ornament of a landmark hotel was a capital expenditure. This despite the fact that the renovation was mandated by a local ordinance. The taxpayer replaced the old structures of the Fairmont in San Francisco, CA, with new ones that were lighter, tougher and less vulnerable to earthquake damage than the original. The taxpayer made a deduction of the $3 million cost in 1984. The lower court judged that, based on Reg. 1.263(a)-1(b), the project materially improved the property's value and significantly extended its useful life, and therefore constituted a capital expenditure. As for the claim of the taxpayer that the expenditures were deductible because they were ordered by the city, the court relied on previous court decisions to argue otherwise.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1996
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If activity is not a business, the loss is capital
Article Abstract:
The Tax Court case 'Matz,' focuses on the implementation of Section 165(c) on deductions for an individual's losses. In the case, the taxpayer reduced his losses as ordinary instead of capital arguing that the losses were brought about during the pursuit of his trade or business in the airline and real estate industries. However, the IRS treated the losses as capital and assessed deficiencies. It argued that the taxpayer only made a one-time investment or loan and did not work in the industries in some capacity. The case further identified factors that determines whether an individual is in pursuit of a trade or a business. These include the extent and nature of efforts to do business, the use of a business office for the sale of a property, and the nature and level of supervision exercised by the individual over any representative selling the property.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1998
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Expenses paid from income do not reduce marital deduction
Article Abstract:
The Supreme Court ruled in the 'Estate of Hubert' case that the payment of administration fees from estate income does not reduce estate tax marital deduction if the amount is not material. In arriving at a decision, the justices relied on Revenue Ruling No. 93-48, in which the IRS recognized that marital deduction is not normally reduced when income from the bequest of the surviving spouse is used by an executor as payment of interest on deferred federal taxes. This means that not all burden on the income of the marital share mandates the reduction of the marital deduction. The concurring justices found the existence of a quantitative materiality test under which the marital deduction is influenced only when income-charged administrative costs amount to a particular level of substantiality.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1997
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