INTRODUCTION TO TAX SCHOOL
Top 100 Cases
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
© Steven J. Willis 2006
1
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• Idaho Power is famous for one important
proposition:
© Steven J. Willis 2006
2
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• Idaho Power is famous for one important
proposition:
Depreciation allocable to the construction
of capital facilities must be capitalized .
© Steven J. Willis 2006
3
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• FACTS:
– Taxpayer owed a variety of vehicles: e.g., cars, trucks, and
trailers.
– During 1962-63, it used the vehicles for two purposes:
• Operation and maintenance.
• Construction of capital facilities.
– The Federal Power Commission required the applicable
depreciation be capitalized; however, Idaho Power deducted it
for tax purposes.
• ISSUE:
– Was the property “used in a trade or business” per section
167.
– Must section 167 depreciation be capitalized if the property is
used in the construction of capital facilities?
• HOLDING:
– Yes.
– Yes.
© Steven J. Willis 2006
4
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• FACTS:
– Taxpayer owed a variety of vehicles: e.g., cars, trucks, and
trailers.
– During 1962-63, it used the vehicles for two purposes:
• Operation and maintenance.
• Construction of capital facilities.
– The Federal Power Commission required the applicable
depreciation be capitalized; however, Idaho Power deducted it
for tax purposes.
• ISSUE:
– Was the property “used in a trade or business” per section
167.
– Must section 167 depreciation be capitalized if the property is
used in the construction of capital facilities?
• HOLDING:
– Yes.
– Yes.
© Steven J. Willis 2006
5
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• FACTS:
– Taxpayer owed a variety of vehicles: e.g., cars, trucks, and
trailers.
– During 1962-63, it used the vehicles for two purposes:
• Operation and maintenance.
• Construction of capital facilities.
– The Federal Power Commission required the applicable
depreciation be capitalized; however, Idaho Power deducted it
for tax purposes.
• ISSUE:
– Was the property “used in a trade or business” per section
167.
– Must section 167 depreciation be capitalized if the property is
used in the construction of capital facilities?
• HOLDING:
– Yes.
– Yes.
© Steven J. Willis 2006
6
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• FACTS:
– Taxpayer owed a variety of vehicles: e.g., cars, trucks, and
trailers.
– During 1962-63, it used the vehicles for two purposes:
• Operation and maintenance.
• Construction of capital facilities.
– The Federal Power Commission required the applicable
depreciation be capitalized;
however,
Idaho
Power
deducted
it
This
was clear
a “use
in a trade
or
for tax purposes.
business” as required by section
• ISSUE:
167 for depreciation.
– Was the property “used in a trade or business” per section
167.
– Must section 167 depreciation be capitalized if the property is
used in the construction of capital facilities?
• HOLDING:
– Yes.
– Yes.
© Steven J. Willis 2006
7
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• FACTS:
– Taxpayer owed a variety of vehicles: e.g., cars, trucks, and
trailers.
– During 1962-63, it used the vehicles for two purposes:
• Operation and maintenance.
• Construction of capital facilities.
– The Federal Power Commission required the applicable
depreciation be capitalized;
however,
Idaho
Power
deducted
it
This
was clear
a “use
in a trade
or
for tax purposes.
business” as required by section
There shall be allowed as a
• ISSUE:
depreciation deduction a
reasonable
allowance
for the
– Was the
property
“used
exhaustion,
167. wear and tear . . .
•
167 for depreciation.
in a trade or business” per section
Must section
depreciation be capitalized if
(1) –
of property
used in 167
the trade
used
in the construction
of capital facilities?
or business,
or
(2) of property held for the
HOLDING:
production of income.
the property is
– Yes.
– Yes.
© Steven J. Willis 2006
8
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• FACTS:
– Taxpayer owed a variety of vehicles: e.g., cars, trucks, and
trailers.
– During 1962-63, it used the vehicles for two purposes:
• Operation and maintenance.
• Construction of capital facilities.
– The Federal Power Commission required the applicable
depreciation be capitalized;
however,
Idaho
Power
deducted
it
This
was clear
a “use
in a trade
or
for tax purposes.
business” as required by section
There shall be allowed as a
• ISSUE:
depreciation deduction a
reasonable
allowance
for the
– Was the
property
“used
exhaustion,
167. wear and tear . . .
•
167 for depreciation.
in a trade or business” per section
Must section
depreciation be capitalized if
(1) –
of property
used in 167
the trade
used
in the construction
of capital facilities?
or business,
or
(2) of property held for the
HOLDING:
production of income.
the property is
– Yes.
– Yes.
© Steven J. Willis 2006
9
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• FACTS:
– Taxpayer owed a variety of vehicles: e.g., cars, trucks, and
trailers.
– During 1962-63, it used the vehicles for two purposes:
• Operation and maintenance.
• Construction of capital facilities.
– The Federal Power Commission required the applicable
depreciation be capitalized;
however,
Idaho
Power
deducted
it
This
was clear
a “use
in a trade
or
for tax purposes.
business” as required by section
There shall be allowed as a
• ISSUE:
depreciation deduction a
reasonable
allowance
for the
– Was the
property
“used
exhaustion,
167. wear and tear . . .
•
167 for depreciation.
in a trade or business” per section
Must section
depreciation be capitalized if
(1) –
of property
used in 167
the trade
used
in the construction
of capital facilities?
or business,
or
(2) of property held for the
HOLDING:
production of income.
the property is
– Yes.
– Yes.
© Steven J. Willis 2006
10
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• FACTS:
– Taxpayer owed a variety of vehicles: e.g., cars, trucks, and
trailers.
– During 1962-63, it used the vehicles for two purposes:
• Operation and maintenance.
• Construction of capital facilities.
– The Federal Power Commission required the applicable
depreciation be capitalized;
however,
Idaho
Power
deducted
it
This
was clear
a “use
in a trade
or
for tax purposes.
business” as required by section
There shall be allowed as a
• ISSUE:
depreciation deduction a
reasonable
allowance
for the
– Was the
property
“used
exhaustion,
167. wear and tear . . .
•
167 for depreciation.
in a trade or business” per section
Must section
depreciation be This
capitalized
if the
(1) –
of property
used in 167
the trade
is the key
used
in the construction
of capital facilities?
or business,
or
language.
(2)
of
property
held
for
the
HOLDING:
production of income.
property is
– Yes.
– Yes.
© Steven J. Willis 2006
11
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• FACTS:
– Taxpayer owed a variety of vehicles: e.g., cars, trucks, and
trailers.
– During 1962-63, it used the vehicles for two purposes:
• Operation and maintenance.
• Construction of capital facilities.
– The Federal Power Commission required the applicable
depreciation be capitalized;
however,
Idaho
Power
deducted
it
This
was clear
a “use
in a trade
or
for tax purposes.
business” as required by section
• ISSUE:
167 for depreciation.
– Was the property “used in a trade or business” per section
167.
– Must section 167 depreciation be capitalized if the property is
if this were
the
used in the Hence,
construction
of capital
facilities?
• HOLDING:
– Yes.
– Yes.
© Steven J. Willis 2006
sole use of the property,
depreciation would be
deductible.
12
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• FACTS:
– Taxpayer owed a variety of vehicles: e.g., cars, trucks, and
trailers.
– During 1962-63, it used the vehicles for two purposes:
• Operation and maintenance.
• Construction of capital facilities.
– The Federal Power Commission required the applicable
depreciation be capitalized;
however,
Idaho
Power
deducted
it
This
was clear
a “use
in a trade
or
for tax purposes.
business” as required by section
• ISSUE:But it was not
167 for depreciation.
use. “used in a trade or business” per section
– Wasthe
thesole
property
167.
– Must section 167 depreciation be capitalized if the property is
if this were
the
used in the Hence,
construction
of capital
facilities?
• HOLDING:
– Yes.
– Yes.
© Steven J. Willis 2006
sole use of the property,
depreciation would be
deductible.
13
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• FACTS:
– Taxpayer owed a variety of vehicles: e.g., cars, trucks, and
trailers.
– During 1962-63, it used the vehicles for two purposes:
• Operation and maintenance.
• Construction of capital facilities.
– The Federal Power Commission required the applicable
depreciation be capitalized; however, Idaho Power deducted it
for tax purposes.
• ISSUE:But it was not
use. “used in a trade or business” per section
– Wasthe
thesole
property
167.
– Must section 167 depreciation be capitalized if the property is
if this were
the
used in the Hence,
construction
of capital
facilities?
• HOLDING:
– Yes.
– Yes.
© Steven J. Willis 2006
sole use of the property,
depreciation would be
deductible.
14
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• FACTS:
– Taxpayer owed a variety of vehicles: e.g., cars, trucks, and
trailers.
– During 1962-63, it used the vehicles for two purposes:
• Operation and maintenance.
• Construction of capital facilities.
– The Federal Power Commission required the applicable
depreciation be capitalized; however, Idaho Power deducted it
for tax purposes.
• ISSUE:
This would not traditionally
appear
to be a “use
in a in a trade or business” per section
– Was
the property
“used
trade or business” justifying
167.
depreciation deductions.
– Must
section 167 depreciation be capitalized if the property is
used in the construction of capital facilities?
• HOLDING:
– Yes.
– Yes.
© Steven J. Willis 2006
15
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• FACTS:
– Taxpayer owed a variety of vehicles: e.g., cars, trucks, and
trailers.
– During 1962-63, it used the vehicles for two purposes:
• Operation and maintenance.
• Construction of capital facilities.
– The Federal Power Commission required the applicable
depreciation be capitalized; however, Idaho
deducted
it
Cases,Power
however,
were
for tax purposes.
split on this issue,
• ISSUE:
This would not traditionally
including the Court of
Appeals in this case –
appear
to be a “use
in a in a trade or business”
– Was
the property
“used
per section
which
allowed
the full
trade or business” justifying
167.
depreciation deduction.
depreciation deductions.
– Must section 167 depreciation be capitalized if the property is
used in the construction of capital facilities?
• HOLDING:
– Yes.
– Yes.
© Steven J. Willis 2006
16
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• FACTS:
– Taxpayer owed a variety of vehicles: e.g., cars, trucks, and
trailers.
– During 1962-63, it used the vehicles for two purposes:
• Operation and maintenance.
• Construction of capital facilities.
– The Federal Power Commission required the applicable
depreciation be capitalized; however, Idaho Power deducted it
for tax purposes.
• ISSUE:
– Was the property “used in a trade or business” per section
167.
– Must section 167 depreciation be capitalized if the property is
used in the construction of capital facilities?
• HOLDING:
– Yes.
– Yes.
© Steven J. Willis 2006
17
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• FACTS:
– Taxpayer owed a variety of vehicles: e.g., cars, trucks, and
trailers.
– During 1962-63, it used the vehicles for two purposes:
• Operation and maintenance.
• Construction of capital facilities.
– The Federal Power Commission required the applicable
depreciation be capitalized; however, Idaho Power deducted it
for tax purposes.
• ISSUE:
•
The state regulatory
– Was the property “used
in a tradealso
or business”
per section
commission
required
167.
capitalization. This affected the
– Must section 167 depreciation
be income
capitalized
company’s
for if the property is
used in the construction
of capital
facilities?
regulatory
and rate-setting
purposes.
HOLDING:
– Yes.
– Yes.
© Steven J. Willis 2006
18
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• FACTS:
– Taxpayer owed a variety of vehicles: e.g., cars, trucks, and
trailers.
– During 1962-63, it used the vehicles for two purposes:
• Operation and maintenance.
• Construction of capital facilities.
– The Federal Power Commission required the applicable
depreciation be capitalized; however, Idaho Power deducted it
for tax purposes.
• ISSUE:
•
The state regulatory
– Was the property “used
in a tradealso
or business”
per section
commission
required
167.
capitalization. This affected the
– Must section 167 depreciation
be income
capitalized
company’s
for if the property is
used in the construction
of capital
facilities?
regulatory
and rate-setting
purposes.
HOLDING:
– Yes.
– Yes.
© Steven J. Willis 2006
19
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• FACTS:
– Taxpayer owed a variety of vehicles: e.g., cars, trucks, and
trailers.
– During 1962-63, it used the vehicles for two purposes:
• Operation and maintenance.
• Construction of capital facilities.
– The Federal Power Commission required the applicable
depreciation be capitalized; however, Idaho Power deducted it
for tax purposes.
• ISSUE:
– Was the property “used in a trade or business” per section
167.
– Must section 167 depreciation be capitalized if the property is
used in the construction of capital facilities?
• HOLDING:
– Yes.
– Yes.
© Steven J. Willis 2006
20
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• FACTS:
– Taxpayer owed a variety of vehicles: e.g., cars, trucks, and
trailers.
– During 1962-63, it used the vehicles for two purposes:
• Operation and maintenance.
• Construction of capital facilities.
– The Federal Power Commission required the applicable
depreciation be capitalized; however, Idaho Power deducted it
for tax purposes.
• ISSUE:
– Was the property “used in a trade or business” per section
167?
– Must section 167 depreciation be capitalized if the property is
used in the construction of capital facilities?
• HOLDING:
– Yes.
– Yes.
© Steven J. Willis 2006
21
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• FACTS:
– Taxpayer owed a variety of vehicles: e.g., cars, trucks, and
trailers.
– During 1962-63, it used the vehicles for two purposes:
• Operation and maintenance.
• Construction of capital facilities.
– The Federal Power Commission required the applicable
depreciation be capitalized; however, Idaho Power deducted it
for tax purposes.
• ISSUE:
– Was the property “used in a trade or business” per section
167?
– Must section 167 depreciation be capitalized if the property is
used in the construction of capital facilities?
• HOLDING:
– Yes.
– Yes.
© Steven J. Willis 2006
22
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• FACTS:
– Taxpayer owed a variety of vehicles: e.g., cars, trucks, and
trailers.
– During 1962-63, it used the vehicles for two purposes:
• Operation and maintenance.
• Construction of capital facilities.
– The Federal Power Commission required the applicable
depreciation be capitalized; however, Idaho Power deducted it
for tax purposes.
• ISSUE:
– Was the property “used in a trade or business” per section
167?
– Must section 167 depreciation be capitalized if the property is
used in the construction of capital facilities?
• HOLDING:
– Yes.
– Yes.
© Steven J. Willis 2006
23
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• FACTS:
– Taxpayer owed a variety of vehicles: e.g., cars, trucks, and
trailers.
– During 1962-63, it used the vehicles for two purposes:
• Operation and maintenance.
• Construction of capital facilities.
– The Federal Power Commission required the applicable
depreciation be capitalized; however, Idaho Power deducted it
for tax purposes.
• ISSUE:
– Was the property “used in a trade or business” per section
167?
– Must section 167 depreciation be capitalized if the property is
used in the construction of capital facilities?
• HOLDING:
– Yes.
– Yes.
© Steven J. Willis 2006
In fact, the
government
conceded this issue.
24
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• FACTS:
– Taxpayer owed a variety of vehicles: e.g., cars, trucks, and
trailers.
– During 1962-63, it used the vehicles for two purposes:
• Operation and maintenance.
• Construction of capital facilities.
– The Federal Power Commission required the applicable
depreciation be capitalized; however, Idaho Power deducted it
for tax purposes.
• ISSUE:
– Was the property “used in a trade or business” per section
167?
– Must section 167 depreciation be capitalized if the property is
used in the construction of capital facilities?
• HOLDING:
– Yes.
– Yes.
© Steven J. Willis 2006
25
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• Section 263 was important to this decision.
© Steven J. Willis 2006
26
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• Section 263 was important to this decision.
The Court described
section 263 as being “of
significance.”
© Steven J. Willis 2006
27
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• Section 263 was important to this decision.
The Court described
section 263 as being “of
significance.”
We could certainly argue that
once the government
conceded the application of
section 167, the application of
section 263 became the
central issue.
© Steven J. Willis 2006
28
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• Section 263 was important to this decision.
The Court described
section 263 as being “of
significance.”
We could certainly argue that
once the government
conceded the application of
section 167, the application of
section 263 became the
central issue.
© Steven J. Willis 2006
I.e., that the vehicles
were “used in a trade
or business”.
29
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• Section 263 was important to this decision.
The Court described
section 263 as being “of
significance.”
We could certainly argue that
once the government
conceded the application of
section 167, the application of
section 263 became the
central issue.
© Steven J. Willis 2006
30
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• Section 263 was important to this decision.
No deduction shall be
allowed for–
(1) Any amount paid out
for new buildings or for
permanent
improvements or
betterments made to
increase the value of
any property or estate.
© Steven J. Willis 2006
31
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• Section 263 was important to this decision.
No deduction shall be
allowed for–
(1) Any amount paid out
for new buildings or for
permanent
improvements or
betterments made to
increase the value of
any property or estate.
© Steven J. Willis 2006
Note:
section 263
disallows
deductions.
32
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• Section 263 was important to this decision.
No deduction shall be
allowed for–
(1) Any amount paid out
for new buildings or for
permanent
improvements or
betterments made to
increase the value of
any property or estate.
© Steven J. Willis 2006
This “capitalization”
section applies to
improvements with
lives greater than
one year.
33
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• Section 263 was important to this decision.
No deduction shall be
allowed for–
(1) Any amount paid
out for new buildings or
for permanent
improvements or
betterments made to
increase the value of
any property or estate.
© Steven J. Willis 2006
But the key language
for the Court was
“paid out.”
34
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• Section 263 was important to this decision.
No deduction shall be
allowed for–
(1) Any amount paid
out for new buildings or
for permanent
improvements or
betterments made to
increase the value of
any property or estate.
© Steven J. Willis 2006
But the key language
for the Court was
“paid out.”
Undoubtedly, amounts
for construction wages
and building materials
(e.g., bricks and steel)
are amounts “paid out.”
35
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• Section 263 was important to this decision.
No deduction shall be
allowed for–
(1) Any amount paid
out for new buildings or
for permanent
improvements or
betterments made to
increase the value of
any property or estate.
© Steven J. Willis 2006
But the key language
for the Court was
“paid out.”
Undoubtedly, amounts
for construction wages
and building materials
(e.g., bricks and steel)
are amounts “paid out.”
36
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• Section 263 was important to this decision.
No deduction shall be
allowed for–
(1) Any amount paid
out for new buildings or
for permanent
improvements or
betterments made to
increase the value of
any property or estate.
© Steven J. Willis 2006
But the key language
for the Court was
“paid out.”
Undoubtedly, amounts
for construction wages
and building materials
(e.g., bricks and steel)
are amounts “paid out.”
37
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• Section 263 was important to this decision.
No deduction shall be
allowed for–
(1) Any amount paid
out for new buildings or
for permanent
improvements or
betterments made to
increase the value of
any property or estate.
But, were amounts for
section 167 depreciation
“paid out”?
© Steven J. Willis 2006
But the key language
for the Court was
“paid out.”
Undoubtedly, amounts
for construction wages
and building materials
(e.g., bricks and steel)
are amounts “paid out.”
38
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• Section 263 was important to this decision.
No deduction shall be
allowed for–
(1) Any amount paid
out for new buildings or
for permanent
improvements or
betterments made to
increase the value of
any property or estate.
But, were amounts for
section 167 depreciation
“paid out”?
© Steven J. Willis 2006
But the key language
for the Court was
“paid out.”
Undoubtedly, amounts
for construction wages
and building materials
(e.g., bricks and steel)
are amounts “paid out.”
39
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
The Court’s critical language was:
© Steven J. Willis 2006
40
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
The Court’s critical language was:
“In acquiring the transportation
equipment, taxpayer "paid out" the
equipment's purchase price;
depreciation is simply the means
of allocating the payment over the
various accounting periods
affected.”
© Steven J. Willis 2006
41
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
The Court’s critical language was:
“In acquiring the transportation
equipment, taxpayer "paid out" the
equipment's purchase price;
depreciation is simply the means
of allocating the payment over the
various accounting periods
affected.”
Hence, section 263 applied
and necessitated
capitalization of the otherwise
allowed depreciation.
© Steven J. Willis 2006
42
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
Other important parts of the decision include:
© Steven J. Willis 2006
43
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
Other important parts of the decision include:
“A deduction for depreciation of the
transportation equipment to the extent of
its use in day-to-day operation and
maintenance was also allowed.”
© Steven J. Willis 2006
44
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
Other important parts of the decision include:
“A deduction for depreciation of the
transportation equipment to the extent of
its use in day-to-day operation and
maintenance was also allowed.”
Thus a portion of the
vehicle depreciation
was currently
deductible in 1962-63.
© Steven J. Willis 2006
45
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
Other important parts of the decision include:
“A deduction for depreciation of the
transportation equipment to the extent of
its use in day-to-day operation and
maintenance was also allowed.”
“[W]here a taxpayer's generally
accepted method of accounting
is made compulsory by the
regulatory agency and that
method clearly reflects income, .
. . it is almost presumptively
controlling of federal income tax
consequences.”
© Steven J. Willis 2006
46
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
Other important parts of the decision include:
“A deduction for depreciation of the
transportation equipment to the extent of
its use in day-to-day operation and
maintenance was also allowed.”
“[W]here a taxpayer's generally
accepted method of accounting
is made compulsory by the
regulatory agency and that
method clearly reflects income, .
. . it is almost presumptively
controlling of federal income tax
consequences.”
© Steven J. Willis 2006
47
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
Other important parts of the decision include:
“A deduction for depreciation of the
transportation equipment to the extent of
its use in day-to-day operation and
maintenance was also allowed.”
“[W]here a taxpayer's generally
accepted method of accounting
is made compulsory by the
regulatory agency and that
method clearly reflects income, .
. . it is almost presumptively
controlling of federal income tax
consequences.”
© Steven J. Willis 2006
48
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
Other important parts of the decision include:
“A deduction for depreciation of the
transportation equipment to the extent of
its use in day-to-day operation and
maintenance was also allowed.”
This contrasts with a rule announced
by the Court in prior cases – and
repeated in Idaho Power:
© Steven J. Willis 2006
“[W]here a taxpayer's generally
accepted method of accounting
is made compulsory by the
regulatory agency and that
method clearly reflects income, .
. . it is almost presumptively
controlling of federal income tax
consequences.”
49
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
Other important parts of the decision include:
“A deduction for depreciation of the
transportation equipment to the extent of
its use in day-to-day operation and
maintenance was also allowed.”
This contrasts with a rule announced
by the Court in prior cases – and
repeated in Idaho Power:
[M]erely because the method of
accounting a taxpayer employs
is in accordance with generally
accepted accounting procedures,
this "is not to hold that for
income tax purposes it so clearly
reflects income as to be binding
on the Treasury."
© Steven J. Willis 2006
“[W]here a taxpayer's generally
accepted method of accounting
is made compulsory by the
regulatory agency and that
method clearly reflects income, .
. . it is almost presumptively
controlling of federal income tax
consequences.”
50
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
Other important parts of the decision include:
“A deduction for depreciation of the
transportation equipment to the extent of
its use in day-to-day operation and
maintenance was also allowed.”
This contrasts with a rule announced
by the Court in prior cases – and
repeated in Idaho Power:
[M]erely because the method of
accounting a taxpayer employs
is in accordance with generally
accepted accounting procedures,
this "is not to hold that for
income tax purposes it so clearly
reflects income as to be binding
on the Treasury."
© Steven J. Willis 2006
“[W]here a taxpayer's generally
accepted method of accounting
is made compulsory by the
regulatory agency and that
method clearly reflects income, .
. . it is almost presumptively
controlling of federal income tax
consequences.”
This language, in part, comes from Schlude v.
Commissioner, 372 U.S. 128 (1963).
51
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
Other important parts of the decision include:
“A deduction for depreciation of the
transportation equipment to the extent of
its use in day-to-day operation and
maintenance was also allowed.”
This contrasts with a rule announced
by the Court in prior cases – and
repeated in Idaho Power:
[M]erely because the method of
accounting a taxpayer employs
is in accordance with generally
accepted accounting procedures,
this "is not to hold that for
income tax purposes it so clearly
reflects income as to be binding
on the Treasury."
© Steven J. Willis 2006
This is a
Top 100
case.
“[W]here a taxpayer's generally
accepted method of accounting
is made compulsory by the
regulatory agency and that
method clearly reflects income, .
. . it is almost presumptively
controlling of federal income tax
consequences.”
This language, in part, comes from Schlude v.
Commissioner, 372 U.S. 128 (1963).
52
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
Other important parts of the decision include:
“A deduction for depreciation of the
transportation equipment to the extent of
its use in day-to-day operation and
maintenance was also allowed.”
This contrasts with a rule announced
by the Court in prior cases – and
repeated in Idaho Power:
[M]erely because the method of
accounting a taxpayer employs
is in accordance with generally
accepted accounting procedures,
this "is not to hold that for
income tax purposes it so clearly
reflects income as to be binding
on the Treasury."
© Steven J. Willis 2006
Note that
regulatory rules
appear to impress
the Court more
than accounting
rules.
“[W]here a taxpayer's generally
accepted method of accounting
is made compulsory by the
regulatory agency and that
method clearly reflects income, .
. . it is almost presumptively
controlling of federal income tax
consequences.”
53
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• To summarize:
© Steven J. Willis 2006
54
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• To summarize:
– When you hear of “Idaho Power,” you should think of:
• The Claim of Right Doctrine
– You should also associate the case with transactional accounting
and the notion that every year stands alone.
• Ideally, you would also associate the case with
– Burnet v. Sanford & Brooks, 282 U.S. 359 (1931)
– U.S. v. Lewis, 340 U.S. 590 (1951).
© Steven J. Willis 2006
55
Commissioner v. Idaho Power Co., 481 U.S. 1 (1974)
• To summarize:
– When you hear of “Idaho Power,” you should think of:
of Depreciation
• The Claim ofCapitalization
Right Doctrine
– You should also associate the case with transactional accounting
and the notion that every year stands alone.
• Ideally, you would also associate the case with
– Burnet v. Sanford & Brooks, 282 U.S. 359 (1931)
– U.S. v. Lewis, 340 U.S. 590 (1951).
© Steven J. Willis 2006
56