Surety Finance Co. v. Commissioner of Internal Revenue
Court of Appeals for the Ninth Circuit · 1935-04-29 · cited 4×
This case involved an appeal by Surety Finance Co. from a Board of Tax Appeals decision upholding the IRS Commissioner's denial of amortization deductions for costs of selling capital stock ($14,658.69) and organization expenses including a business system ($21,988.04) on the company's 1926 and 1927 tax returns. The company sought to amortize these amounts over its 50-year corporate life under section 234(a)(7) of the Revenue Act of 1926 as exhaustion of property used in its business. The court held that the expenses were capital outlays for acquiring capital and not amortizable under the statute, distinguishing them from limited incorporation fees that might qualify, and found no proper allocation or proof for any allowable portion. It reasoned that tax deductions require explicit statutory authorization, accounting practices do not control, and precedents like Hershey Mfg. Co. did not apply to stock sales or system installation costs.
