INTRODUCTION TO TAX SCHOOL Top 100 Cases Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) Edited Case Unedited Case Slides Top 100 Cases List Top 33 Doctrine List © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) Idaho Power is famous for one important proposition: © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) Idaho Power is famous for one important proposition: Depreciation allocable to the construction of capital facilities must be capitalized . © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) FACTS: Taxpayer owed a variety of vehicles: e.g., cars, trucks, and trailers. During 1962-63, it used the vehicles for two purposes: Operation and maintenance. Construction of capital facilities. The Federal Power Commission required the applicable depreciation be capitalized; however, Idaho Power deducted it for tax purposes. ISSUE: Was the property “used in a trade or business” per section 167. Must section 167 depreciation be capitalized if the property is used in the construction of capital facilities? HOLDING: Yes. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) FACTS: Taxpayer owed a variety of vehicles: e.g., cars, trucks, and trailers. During 1962-63, it used the vehicles for two purposes: Operation and maintenance. Construction of capital facilities. The Federal Power Commission required the applicable depreciation be capitalized; however, Idaho Power deducted it for tax purposes. ISSUE: Was the property “used in a trade or business” per section 167. Must section 167 depreciation be capitalized if the property is used in the construction of capital facilities? HOLDING: Yes. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) FACTS: Taxpayer owed a variety of vehicles: e.g., cars, trucks, and trailers. During 1962-63, it used the vehicles for two purposes: Operation and maintenance. Construction of capital facilities. The Federal Power Commission required the applicable depreciation be capitalized; however, Idaho Power deducted it for tax purposes. ISSUE: Was the property “used in a trade or business” per section 167. Must section 167 depreciation be capitalized if the property is used in the construction of capital facilities? HOLDING: Yes. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) FACTS: Taxpayer owed a variety of vehicles: e.g., cars, trucks, and trailers. During 1962-63, it used the vehicles for two purposes: Operation and maintenance. Construction of capital facilities. The Federal Power Commission required the applicable depreciation be capitalized; however, Idaho Power deducted it for tax purposes. ISSUE: Was the property “used in a trade or business” per section 167. Must section 167 depreciation be capitalized if the property is used in the construction of capital facilities? HOLDING: Yes. This was clear a “use in a trade or business” as required by section 167 for depreciation. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) FACTS: Taxpayer owed a variety of vehicles: e.g., cars, trucks, and trailers. During 1962-63, it used the vehicles for two purposes: Operation and maintenance. Construction of capital facilities. The Federal Power Commission required the applicable depreciation be capitalized; however, Idaho Power deducted it for tax purposes. ISSUE: Was the property “used in a trade or business” per section 167. Must section 167 depreciation be capitalized if the property is used in the construction of capital facilities? HOLDING: Yes. This was clear a “use in a trade or business” as required by section 167 for depreciation. There shall be allowed as a depreciation deduction a reasonable allowance for the exhaustion, wear and tear . . . (1) of property used in the trade or business, or (2) of property held for the production of income. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) FACTS: Taxpayer owed a variety of vehicles: e.g., cars, trucks, and trailers. During 1962-63, it used the vehicles for two purposes: Operation and maintenance. Construction of capital facilities. The Federal Power Commission required the applicable depreciation be capitalized; however, Idaho Power deducted it for tax purposes. ISSUE: Was the property “used in a trade or business” per section 167. Must section 167 depreciation be capitalized if the property is used in the construction of capital facilities? HOLDING: Yes. This was clear a “use in a trade or business” as required by section 167 for depreciation. There shall be allowed as a depreciation deduction a reasonable allowance for the exhaustion, wear and tear . . . (1) of property used in the trade or business, or (2) of property held for the production of income. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) FACTS: Taxpayer owed a variety of vehicles: e.g., cars, trucks, and trailers. During 1962-63, it used the vehicles for two purposes: Operation and maintenance. Construction of capital facilities. The Federal Power Commission required the applicable depreciation be capitalized; however, Idaho Power deducted it for tax purposes. ISSUE: Was the property “used in a trade or business” per section 167. Must section 167 depreciation be capitalized if the property is used in the construction of capital facilities? HOLDING: Yes. This was clear a “use in a trade or business” as required by section 167 for depreciation. There shall be allowed as a depreciation deduction a reasonable allowance for the exhaustion, wear and tear . . . (1) of property used in the trade or business, or (2) of property held for the production of income. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) FACTS: Taxpayer owed a variety of vehicles: e.g., cars, trucks, and trailers. During 1962-63, it used the vehicles for two purposes: Operation and maintenance. Construction of capital facilities. The Federal Power Commission required the applicable depreciation be capitalized; however, Idaho Power deducted it for tax purposes. ISSUE: Was the property “used in a trade or business” per section 167. Must section 167 depreciation be capitalized if the property is used in the construction of capital facilities? HOLDING: Yes. This was clear a “use in a trade or business” as required by section 167 for depreciation. There shall be allowed as a depreciation deduction a reasonable allowance for the exhaustion, wear and tear . . . (1) of property used in the trade or business, or (2) of property held for the production of income. This is the key language. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) FACTS: Taxpayer owed a variety of vehicles: e.g., cars, trucks, and trailers. During 1962-63, it used the vehicles for two purposes: Operation and maintenance. Construction of capital facilities. The Federal Power Commission required the applicable depreciation be capitalized; however, Idaho Power deducted it for tax purposes. ISSUE: Was the property “used in a trade or business” per section 167. Must section 167 depreciation be capitalized if the property is used in the construction of capital facilities? HOLDING: Yes. This was clear a “use in a trade or business” as required by section 167 for depreciation. Hence, if this were the sole use of the property, depreciation would be deductible. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) FACTS: Taxpayer owed a variety of vehicles: e.g., cars, trucks, and trailers. During 1962-63, it used the vehicles for two purposes: Operation and maintenance. Construction of capital facilities. The Federal Power Commission required the applicable depreciation be capitalized; however, Idaho Power deducted it for tax purposes. ISSUE: Was the property “used in a trade or business” per section 167. Must section 167 depreciation be capitalized if the property is used in the construction of capital facilities? HOLDING: Yes. This was clear a “use in a trade or business” as required by section 167 for depreciation. But it was not the sole use. Hence, if this were the sole use of the property, depreciation would be deductible. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) FACTS: Taxpayer owed a variety of vehicles: e.g., cars, trucks, and trailers. During 1962-63, it used the vehicles for two purposes: Operation and maintenance. Construction of capital facilities. The Federal Power Commission required the applicable depreciation be capitalized; however, Idaho Power deducted it for tax purposes. ISSUE: Was the property “used in a trade or business” per section 167. Must section 167 depreciation be capitalized if the property is used in the construction of capital facilities? HOLDING: Yes. But it was not the sole use. Hence, if this were the sole use of the property, depreciation would be deductible. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) FACTS: Taxpayer owed a variety of vehicles: e.g., cars, trucks, and trailers. During 1962-63, it used the vehicles for two purposes: Operation and maintenance. Construction of capital facilities. The Federal Power Commission required the applicable depreciation be capitalized; however, Idaho Power deducted it for tax purposes. ISSUE: Was the property “used in a trade or business” per section 167. Must section 167 depreciation be capitalized if the property is used in the construction of capital facilities? HOLDING: Yes. This would not traditionally appear to be a “use in a trade or business” justifying depreciation deductions. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) FACTS: Taxpayer owed a variety of vehicles: e.g., cars, trucks, and trailers. During 1962-63, it used the vehicles for two purposes: Operation and maintenance. Construction of capital facilities. The Federal Power Commission required the applicable depreciation be capitalized; however, Idaho Power deducted it for tax purposes. ISSUE: Was the property “used in a trade or business” per section 167. Must section 167 depreciation be capitalized if the property is used in the construction of capital facilities? HOLDING: Yes. Cases, however, were split on this issue, including the Court of Appeals in this case – which allowed the full depreciation deduction. This would not traditionally appear to be a “use in a trade or business” justifying depreciation deductions. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) FACTS: Taxpayer owed a variety of vehicles: e.g., cars, trucks, and trailers. During 1962-63, it used the vehicles for two purposes: Operation and maintenance. Construction of capital facilities. The Federal Power Commission required the applicable depreciation be capitalized; however, Idaho Power deducted it for tax purposes. ISSUE: Was the property “used in a trade or business” per section 167. Must section 167 depreciation be capitalized if the property is used in the construction of capital facilities? HOLDING: Yes. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) FACTS: Taxpayer owed a variety of vehicles: e.g., cars, trucks, and trailers. During 1962-63, it used the vehicles for two purposes: Operation and maintenance. Construction of capital facilities. The Federal Power Commission required the applicable depreciation be capitalized; however, Idaho Power deducted it for tax purposes. ISSUE: Was the property “used in a trade or business” per section 167. Must section 167 depreciation be capitalized if the property is used in the construction of capital facilities? HOLDING: Yes. The state regulatory commission also required capitalization. This affected the company’s income for regulatory and rate-setting purposes. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) FACTS: Taxpayer owed a variety of vehicles: e.g., cars, trucks, and trailers. During 1962-63, it used the vehicles for two purposes: Operation and maintenance. Construction of capital facilities. The Federal Power Commission required the applicable depreciation be capitalized; however, Idaho Power deducted it for tax purposes. ISSUE: Was the property “used in a trade or business” per section 167. Must section 167 depreciation be capitalized if the property is used in the construction of capital facilities? HOLDING: Yes. The state regulatory commission also required capitalization. This affected the company’s income for regulatory and rate-setting purposes. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) FACTS: Taxpayer owed a variety of vehicles: e.g., cars, trucks, and trailers. During 1962-63, it used the vehicles for two purposes: Operation and maintenance. Construction of capital facilities. The Federal Power Commission required the applicable depreciation be capitalized; however, Idaho Power deducted it for tax purposes. ISSUE: Was the property “used in a trade or business” per section 167. Must section 167 depreciation be capitalized if the property is used in the construction of capital facilities? HOLDING: Yes. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) FACTS: Taxpayer owed a variety of vehicles: e.g., cars, trucks, and trailers. During 1962-63, it used the vehicles for two purposes: Operation and maintenance. Construction of capital facilities. The Federal Power Commission required the applicable depreciation be capitalized; however, Idaho Power deducted it for tax purposes. ISSUE: Was the property “used in a trade or business” per section 167? Must section 167 depreciation be capitalized if the property is used in the construction of capital facilities? HOLDING: Yes. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) FACTS: Taxpayer owed a variety of vehicles: e.g., cars, trucks, and trailers. During 1962-63, it used the vehicles for two purposes: Operation and maintenance. Construction of capital facilities. The Federal Power Commission required the applicable depreciation be capitalized; however, Idaho Power deducted it for tax purposes. ISSUE: Was the property “used in a trade or business” per section 167? Must section 167 depreciation be capitalized if the property is used in the construction of capital facilities? HOLDING: Yes. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) FACTS: Taxpayer owed a variety of vehicles: e.g., cars, trucks, and trailers. During 1962-63, it used the vehicles for two purposes: Operation and maintenance. Construction of capital facilities. The Federal Power Commission required the applicable depreciation be capitalized; however, Idaho Power deducted it for tax purposes. ISSUE: Was the property “used in a trade or business” per section 167? Must section 167 depreciation be capitalized if the property is used in the construction of capital facilities? HOLDING: Yes. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) FACTS: Taxpayer owed a variety of vehicles: e.g., cars, trucks, and trailers. During 1962-63, it used the vehicles for two purposes: Operation and maintenance. Construction of capital facilities. The Federal Power Commission required the applicable depreciation be capitalized; however, Idaho Power deducted it for tax purposes. ISSUE: Was the property “used in a trade or business” per section 167? Must section 167 depreciation be capitalized if the property is used in the construction of capital facilities? HOLDING: Yes. In fact, the government conceded this issue. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) FACTS: Taxpayer owed a variety of vehicles: e.g., cars, trucks, and trailers. During 1962-63, it used the vehicles for two purposes: Operation and maintenance. Construction of capital facilities. The Federal Power Commission required the applicable depreciation be capitalized; however, Idaho Power deducted it for tax purposes. ISSUE: Was the property “used in a trade or business” per section 167? Must section 167 depreciation be capitalized if the property is used in the construction of capital facilities? HOLDING: Yes. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) Section 263 was important to this decision. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) Section 263 was important to this decision. The Court described section 263 as being “of significance.” © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) Section 263 was important to this decision. The Court described section 263 as being “of significance.” We could certainly argue that once the government conceded the application of section 167, the application of section 263 became the central issue. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) Section 263 was important to this decision. The Court described section 263 as being “of significance.” We could certainly argue that once the government conceded the application of section 167, the application of section 263 became the central issue. I.e., that the vehicles were “used in a trade or business”. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) Section 263 was important to this decision. The Court described section 263 as being “of significance.” We could certainly argue that once the government conceded the application of section 167, the application of section 263 became the central issue. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) Section 263 was important to this decision. No deduction shall be allowed for– (1) Any amount paid out for new buildings or for permanent improvements or betterments made to increase the value of any property or estate. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) Section 263 was important to this decision. Note: section 263 disallows deductions. No deduction shall be allowed for– (1) Any amount paid out for new buildings or for permanent improvements or betterments made to increase the value of any property or estate. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) Section 263 was important to this decision. No deduction shall be allowed for– (1) Any amount paid out for new buildings or for permanent improvements or betterments made to increase the value of any property or estate. This “capitalization” section applies to improvements with lives greater than one year. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) Section 263 was important to this decision. No deduction shall be allowed for– (1) Any amount paid out for new buildings or for permanent improvements or betterments made to increase the value of any property or estate. But the key language for the Court was “paid out.” © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) Section 263 was important to this decision. No deduction shall be allowed for– (1) Any amount paid out for new buildings or for permanent improvements or betterments made to increase the value of any property or estate. But the key language for the Court was “paid out.” Undoubtedly, amounts for construction wages and building materials (e.g., bricks and steel) are amounts “paid out.” © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) Section 263 was important to this decision. No deduction shall be allowed for– (1) Any amount paid out for new buildings or for permanent improvements or betterments made to increase the value of any property or estate. But the key language for the Court was “paid out.” Undoubtedly, amounts for construction wages and building materials (e.g., bricks and steel) are amounts “paid out.” © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) Section 263 was important to this decision. No deduction shall be allowed for– (1) Any amount paid out for new buildings or for permanent improvements or betterments made to increase the value of any property or estate. But the key language for the Court was “paid out.” Undoubtedly, amounts for construction wages and building materials (e.g., bricks and steel) are amounts “paid out.” © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) Section 263 was important to this decision. No deduction shall be allowed for– (1) Any amount paid out for new buildings or for permanent improvements or betterments made to increase the value of any property or estate. But the key language for the Court was “paid out.” Undoubtedly, amounts for construction wages and building materials (e.g., bricks and steel) are amounts “paid out.” But, were amounts for section 167 depreciation “paid out”? © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) Section 263 was important to this decision. No deduction shall be allowed for– (1) Any amount paid out for new buildings or for permanent improvements or betterments made to increase the value of any property or estate. But the key language for the Court was “paid out.” Undoubtedly, amounts for construction wages and building materials (e.g., bricks and steel) are amounts “paid out.” But, were amounts for section 167 depreciation “paid out”? © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) The Court’s critical language was: © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) The Court’s critical language was: “In acquiring the transportation equipment, taxpayer "paid out" the equipment's purchase price; depreciation is simply the means of allocating the payment over the various accounting periods affected.” © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) The Court’s critical language was: “In acquiring the transportation equipment, taxpayer "paid out" the equipment's purchase price; depreciation is simply the means of allocating the payment over the various accounting periods affected.” Hence, section 263 applied and necessitated capitalization of the otherwise allowed depreciation. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) Other important parts of the decision include: © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) Other important parts of the decision include: “A deduction for depreciation of the transportation equipment to the extent of its use in day-to-day operation and maintenance was also allowed.” © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) Other important parts of the decision include: “A deduction for depreciation of the transportation equipment to the extent of its use in day-to-day operation and maintenance was also allowed.” Thus a portion of the vehicle depreciation was currently deductible in 1962-63. © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) Other important parts of the decision include: “A deduction for depreciation of the transportation equipment to the extent of its use in day-to-day operation and maintenance was also allowed.” “[W]here a taxpayer's generally accepted method of accounting is made compulsory by the regulatory agency and that method clearly reflects income, . . . it is almost presumptively controlling of federal income tax consequences.” © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) Other important parts of the decision include: “A deduction for depreciation of the transportation equipment to the extent of its use in day-to-day operation and maintenance was also allowed.” “[W]here a taxpayer's generally accepted method of accounting is made compulsory by the regulatory agency and that method clearly reflects income, . . . it is almost presumptively controlling of federal income tax consequences.” © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) Other important parts of the decision include: “A deduction for depreciation of the transportation equipment to the extent of its use in day-to-day operation and maintenance was also allowed.” “[W]here a taxpayer's generally accepted method of accounting is made compulsory by the regulatory agency and that method clearly reflects income, . . . it is almost presumptively controlling of federal income tax consequences.” © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) Other important parts of the decision include: “A deduction for depreciation of the transportation equipment to the extent of its use in day-to-day operation and maintenance was also allowed.” This contrasts with a rule announced by the Court in prior cases – and repeated in Idaho Power: “[W]here a taxpayer's generally accepted method of accounting is made compulsory by the regulatory agency and that method clearly reflects income, . . . it is almost presumptively controlling of federal income tax consequences.” © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) Other important parts of the decision include: “A deduction for depreciation of the transportation equipment to the extent of its use in day-to-day operation and maintenance was also allowed.” This contrasts with a rule announced by the Court in prior cases – and repeated in Idaho Power: “[W]here a taxpayer's generally accepted method of accounting is made compulsory by the regulatory agency and that method clearly reflects income, . . . it is almost presumptively controlling of federal income tax consequences.” [M]erely because the method of accounting a taxpayer employs is in accordance with generally accepted accounting procedures, this "is not to hold that for income tax purposes it so clearly reflects income as to be binding on the Treasury." © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) Other important parts of the decision include: “A deduction for depreciation of the transportation equipment to the extent of its use in day-to-day operation and maintenance was also allowed.” This contrasts with a rule announced by the Court in prior cases – and repeated in Idaho Power: “[W]here a taxpayer's generally accepted method of accounting is made compulsory by the regulatory agency and that method clearly reflects income, . . . it is almost presumptively controlling of federal income tax consequences.” [M]erely because the method of accounting a taxpayer employs is in accordance with generally accepted accounting procedures, this "is not to hold that for income tax purposes it so clearly reflects income as to be binding on the Treasury." This language, in part, comes from Schlude v. Commissioner, 372 U.S. 128 (1963). © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) Other important parts of the decision include: “A deduction for depreciation of the transportation equipment to the extent of its use in day-to-day operation and maintenance was also allowed.” This is a Top 100 case. This contrasts with a rule announced by the Court in prior cases – and repeated in Idaho Power: “[W]here a taxpayer's generally accepted method of accounting is made compulsory by the regulatory agency and that method clearly reflects income, . . . it is almost presumptively controlling of federal income tax consequences.” [M]erely because the method of accounting a taxpayer employs is in accordance with generally accepted accounting procedures, this "is not to hold that for income tax purposes it so clearly reflects income as to be binding on the Treasury." This language, in part, comes from Schlude v. Commissioner, 372 U.S. 128 (1963). © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) Other important parts of the decision include: Note that regulatory rules appear to impress the Court more than accounting rules. “A deduction for depreciation of the transportation equipment to the extent of its use in day-to-day operation and maintenance was also allowed.” This contrasts with a rule announced by the Court in prior cases – and repeated in Idaho Power: “[W]here a taxpayer's generally accepted method of accounting is made compulsory by the regulatory agency and that method clearly reflects income, . . . it is almost presumptively controlling of federal income tax consequences.” [M]erely because the method of accounting a taxpayer employs is in accordance with generally accepted accounting procedures, this "is not to hold that for income tax purposes it so clearly reflects income as to be binding on the Treasury." © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) To summarize: © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) To summarize: When you hear of “Idaho Power,” you should think of: The Claim of Right Doctrine You should also associate the case with transactional accounting and the notion that every year stands alone. Ideally, you would also associate the case with Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) U.S. v. Lewis, 340 U.S. 590 (1951). © Steven J. Willis and UF College of Law 2007 All Rights Reserved

Commissioner v. Idaho Power Co., 481 U.S. 1 (1974) To summarize: When you hear of “Idaho Power,” you should think of: The Claim of Right Doctrine You should also associate the case with transactional accounting and the notion that every year stands alone. Ideally, you would also associate the case with Burnet v. Sanford & Brooks, 282 U.S. 359 (1931) U.S. v. Lewis, 340 U.S. 590 (1951). Capitalization of Depreciation © Steven J. Willis and UF College of Law 2007 All Rights Reserved