Federal Income Tax-Deductibilty of Depreciation in Year of Sale Where Sale Price Exceeds Adjusted Basis of Asset

Plaintiff sold all the assets used in its business, in the middle of a fiscal year, at a price in excess of their depreciated cost at the beginning of the year. When plaintiff purchased the assets in question, it intended to use them until they became scrap. The assets were sold as part of a going concern years before plaintiff originally intended to dispose of them. A depreciation deduction claimed in the year of the sale was disallowed. An additional assessment was paid, a claim for refund was denied, and this suit was instituted. Held, judgment for plaintiff. Depreciation is deductible even though assets are sold during the taxable year at a price in excess of their depreciated cost at the beginning of the year. S & A Co. v. United States, 218 F. Supp. 677 (D. Minn. 1963)