
    F. M. Reed, Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 6776.
    Promulgated April 29, 1927.
    1. The March 1, 1913, value of a clam and its probable useful life from that date determined to find the depreciated value basis upon which the allowable deduction on account of the destruction of a part thereof in 1920, is computed.
    2. The March 1, 1913, value and probable useful life of a dam, as well as the probable useful life of a portion thereof reconstructed in 1920, determined for depreciation purposes.
    
      
      PeiTy A. Sletteland, Esq., for the petitioner.
    
      W. F. Gibbs, Esq., for the respondent.
    This proceeding results from the determination by respondent of a deficiency in income tax for the calendar year 1920, in the amount of $120.86. Two errors are assigned: (1) The disallowance by the respondent of a loss of $2,394.30 arising from the partial destruction of a dam which had a March 1, 1913, value of $12,000; (2) depreciation on a dam for the year 1920 and years prior thereto, has been incorrectly computed.
    There is no dispute between the parties that petitioner suffered the loss of one-fourth of its dam, in the year 1920. The only questions relate to the fair market price or value of the dam on March 1, 1913, the depreciation sustained from March 1, 1913, to date of destruction on March 1, 1920, and the correct rate of depreciation for the calendar year 1920.
    FINDINGS OF FACT.
    Petitioner is an individual residing at Necedah, Wis. In 1905, he constructed a dam on the Yellow River, at Necedah, which was completed and ready for operation in 1906. On March 1, 1913, the fair market price or value of the dam was $12,000. One-fourth of said dam was destroyed by flood on or about March 1, 1920. The useful life of the dam on March 1, 1913, was 32 years.
    The cost of the new part of the dam constructed between March, 1920, and July, 1920, was $13,000, and the useful life of the new part of the dam, when so constructed and completed, was 40 years.
   OPINION.

MillikeN :

The March 1, 1913, value of the dam in question was $12,000, and it should be depreciated on the basis of the useful life, as determined, down to March 1, 1920, to determine the residual value of the dam on that date. One-fourth of the residual value of the dam on March 1, 1920, should be allowed as a loss and depreciation computed for the calendar year 1920 on the useful life as determined for the three-fourths of the old dam remaining and depreciation allowed based upon the useful life for the new part of the dam, construction of which was completed on July 1, 1920, and from which date depreciation should be allowed.

Judgment %uill be entered on 15 days’ notice, under Rule 50.  