Commissioner v. Idaho Power Co.
United States Supreme Court
418 U.S. 1 (1974)
Idaho Power Company (plaintiff) used its own equipment both for routine operations and maintenance and to build new capital facilities, and claimed a current depreciation deduction for both uses; the Commissioner (defendant) allowed the deduction for operations-related depreciation but disallowed it for the construction-related portion, insisting that cost instead be capitalized and recovered over the new facility's decades-long useful life. The Tax Court agreed with the Commissioner, but the court of appeals reversed in favor of Idaho Power.
Whether a federal taxpayer is entitled to a deduction from gross income for depreciation on equipment that the taxpayer owns and uses in the construction of his own capital facilities.