
    Appeal of McEWEN LUMBER CO.
    Docket No. 196.
    Under sections 215 and 235 of the Revenue Act of 1918 a taxpayer is not entitled to deduct from gross income a portion of the original cost of erection of buildings and installation of machinery during the year.
    Submitted November 6, 1924;
    decided November 18, 1924.
    
      Mr. W. B. McEwen, president of the corporation, for the taxpayer.
    
      J. A. Adams, Esq. (Nelson T. Hartson, Solicitor of Internal Revenue) for the Commissioner.
    Before GhaupneR, Littleton, and Smith.
    From the oral testimony given before it the Board makes the following
    FINDINGS OP FACT.
    The taxpayer is a North Carolina corporation with its principal office at Azales, North Carolina.
    The deficiency letter was mailed to the taxpayer by the Commissioner on July 17, 1924.
    The taxes in controversy are income taxes for the calendar year 1919 in the amount of $4,984.82.
    During the year 1919 the taxpayer constructed on its property at Portsmouth, Va., a planing mill which consisted of buildings and machines installed therein. The exact cost of the buildings and machinery is not shown. During the calendar year 1919 the taxpayer charged off against buildings the sum of $4,772.95 and against machinery the sum of $5,678.76, or a total of $10,451.71, which represented part of the original cost of the erection of buildings and installation of machinery. The amount of $10,451.71 was deducted by taxpayer from gross income in its return for 1919, in addition to a reasonable amount for depreciation arising from wear and tear, on the ground that the amount represented excessive and arbitrary cost of labor and material in constructing the planing mill plant.
    Upon audit of the return for the year 1919 the Commissioner disallowed the deduction of the said amount of $10,451.71.
   decision.

Under sections 215 and 235 of the Revenue Act of 1918 the taxpayer is not entitled, in computing net income, to deduct any portion of the claimed excessive amount paid out for buildings and machinery in erection of its planing mill plant.

The deficiency determined by the Commissioner is approved.  