Brief Fact Summary. The Simons purchased two antique bows for use as musicians. They attempted to deduct depreciation of the bows because of the wear and tear from the use in concerts. These bows retained value after they could no longer be used because they were collector’s items.
Synopsis of Rule of Law. In order to be considered depreciable property it must have a determinable useful life.
First, useful life is measured by the use in a taxpayer's business, not by the full abstract economic life of the asset in any business.View Full Point of Law
Issue. Do the bows have a “determinable useful life” that will allow for the depreciation deduction?
Held. Circuit Judge Winter issued the opinion for the United States Second Circuit Court of Appeals in holding for Petitioners and finding that the bows did not have to have a “determinable useful life” to qualify for a depreciation deduction, and were deductible.
Dissent. Judge Oakes issued a dissenting opinion arguing that Congress did not intend to do away with the “determinable useful life” test and that the ruling will be abused by businesses.
Discussion. The Court of Appeals found that the test is whether property will suffer exhaustion, wear and tear, or obsolescence in its use by a business. The Court points out that the law was intended by Congress to encourage economic in business property. The Commissioner argued that businesses could use the law to purchase wasteful antiques. However, the Court found that the test articulate should prevent abuse by businesses because it requires demonstrable wear and tear in it business