
    Appeal of THE BEAUMONT CO.
    Docket No. 5444.
    Submitted December 7, 1925.
    Decided February 17, 1926.
    Expenditures made in connection with the development of patents held, to be capital expenditures and not deductible from gross income as expenses.
    
      Thos. P. Dudley, Jr., Esq., for the Commissioner.
    Before Gealtpner, Trammell, and Phillips.
    This is an appeal from the determination of a deficiency in income and profits taxes for the fiscal year ended June 30, 1921, in the amount of $3,717.72, of which $1,859.52 is in controversy. The disputed portion of the deficiency arises from the disallowance by the Commissioner of expenses incurred in the development of patents which were claimed by the taxpayer as a deduction from gross income.
    FINDINGS OP PACT.
    The taxpayer is a West Virginia corporation, with its principal office at Morgantown, and during the fiscal year ended June 30, 1921, was affiliated with the Spring Stopper Co. of New York and the Spring Stopper Co. of Delaware.
    In the fiscal year here involved the Spring Stopper Co. of New York incurred experimental expenses in connection with the development of patents in the amount of $5,293.39 and had a gross income of $2.84. The difference between these amounts, or $5,290.55, was claimed by the taxpayer as a deduction from income in reporting the consolidated income of the affiliated companies. Similar expenditures in previous years had been capitalized.
    The Commissioner disallowed the claimed deduction in view of the past practice of the taxpayer in capitalizing such expenditures.
    DECISION.
    The determination of the Commissioner is approved.
   OPINION.

GeatjpNer

: We must approve the action of the Commissioner in disallowing the claimed deduction, not on the ground that the taxpayer is precluded from changing its method of reporting the kind of expenditures which give rise to the deficiency, but for the reason that expenditures made for the development and in the acquisition of patents are properly capital expenditures. Appeal of Gilliam Manufacturing Co., 1 B. T. A. 967; Appeal of Goodell-Pratt Co., 3 B. T. A. 30.  