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Midland Empire Packing Co. v. Commissioner

Citation. Midland Empire Packing Co. v. Commissioner, 14 T.C. 635
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Brief Fact Summary.

Petitioner owned a meat packing plant. Oil began seeping into the basement rooms and Petitioner was forced to spend money to stop the seepage in order to keep the business operating.

Synopsis of Rule of Law.

An “ordinary” business expense does not mean that the expense has to be habitual or normal for the same taxpayer.


Petitioner used basements rooms for 25 years for curing ham and bacon, and for storing meat. There had been seepage of water in the past. During the tax year in question, oil was seeping through the concrete walls of the basement. The oil came from a nearby refinery plant. Federal meat inspectors told Petitioner that he had to oil proof the basement and stop using water from the well that was also contaminated. Petitioner added a concrete lining to the walls and to the floor, and sought to deduct the cost. The Commissioner claims that the expense was necessary but not ordinary.


Whether the expenditure for a concrete lining in Petitioner’s basement is deductible as an ordinary and necessary business expense?


Judge Arundell issued the opinion for the Tax Court of the United States in holding for Petitioner and allowing the expense to be deductible as an ordinary and necessary business expense.


The expenditure only allowed Petitioner to continue to operate his business as he had in the past. The Tax Court found that ordinary does not habitual or normal in that the same taxpayer will have to make that expense often. Rather, ordinary means the normal thing to do for a taxpayer in that type of business and situation.

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