Ft. Howard Paper Co. v. Commissioner
United States Tax Court
Petitioner for 35 years capitalized only the direct costs of labor and materials connected with self-constructed items. Overhead expenditures were in part allocated to inventory and in part deducted currently. Respondent was fully aware of petitioner's practice and had frequently adopted the same method in requiring petitioner to capitalize repair items which petitioner had deducted on its returns.
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Petitioner for 35 years capitalized only the direct costs of labor and materials connected with self-constructed items. Overhead expenditures were in part allocated to inventory and in part deducted currently. Respondent was fully aware of petitioner's practice and had frequently adopted the same method in requiring petitioner to capitalize repair items which petitioner had deducted on its returns. On a second audit of petitioner's 1961 return, respondent determined that a portion of overhead expenses should be attributed to self-constructed assets and capitalized. Held, petitioner, under all…
1Opinion of the Court
OPINION
The core issue herein involves the question of how petitioner should treat overhead expenses in determining the cost of self-constructed assets for tax purposes. Respondent contends that portions of such expenses should be capitalized and added to the cost basis of the assets. Petitioner asserts that it should be entitled to continue its past practice of capitalizing only direct labor and materials costs without allocation of overhead.
Petitioner is a large manufacturer of a great variety of paper and paper products. To a marked degree, its operations are self-sufficient, e.g., it…
2Cases cited26 opinions
- Commissioner v. HansenSupreme Court of the United States · 1959
- American Automobile Assn. v. United StatesSupreme Court of the United States · 1961
- Niles Bement Pond Co. v. United StatesSupreme Court of the United States · 1930
- Ben Perlmutter and Bernice Perlmutter v. Commissioner of Internal Revenue, the Perlmutters, Inc. v. Commissioner of Internal RevenueCourt of Appeals for the Tenth Circuit · 1967
- Perlmutter v. CommissionerUnited States Tax Court · 1965
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3Cited by88 opinions
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- Coors v. CommissionerUnited States Tax Court · 1973
- FPL Group, Inc. v. CommissionerUnited States Tax Court · 2000
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