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Commissioner v. Boylston Market Ass

Citation. Comm’r v. Boylston Mkt. Ass’n, 131 F.2d 966, 42-2 U.S. Tax Cas. (CCH) P9820, 30 A.F.T.R. (P-H) 512, 144 A.L.R. 528 (1st Cir. Dec. 11, 1942)
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Brief Fact Summary.

Taxpayer chose to deduct his prepaid insurance during the year it was paid instead of on a prorated basis. The insurance covered and three year period and the Board of Tax Appeals ruled that the annual deductions must be calculated on a prorated basis like a capital expense.

Synopsis of Rule of Law.

When the life of the asset extends beyond the taxable year payments are to be prorated.


Taxpayer deducted each year the amount of prepaid insurance premiums applicable to carrying insurance for that year regardless of when the premium was paid. The Commissioner limited the taxpayer’s deductions for the insurance expense to premiums paid during the tax year. The Board of Tax Appeals reversed holding that the taxpayer must deduct on a prorated basis over the life of the asset, which in this case is the insurance coverage.


May the taxpayer deduct insurance premiums actually paid each year, or must the deduction be taken each year on a pro-rata basis like a capital expense?


Circuit Judge Mahoney issued the opinion for the United States First Circuit Court of Appeals in affirming the Board of Tax Appeals and holding that the taxpayer must deduct the insurance premiums on a prorated basis like a capital expense.


Permitting the taxpayer to take a full deduction in the year the payment for the prepaid services is made would distort the income. Thus, the Court of Appeals treats prepaid insurance in this case as a capital expense.

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