Klarinet Archive - Posting 000050.txt from 1995/12

From: "Steven A. Haaser" <HAASER@-----.EDU>
Subj: Musicians v. IRS ruling reversed
Date: Mon, 4 Dec 1995 11:10:14 -0500

Klarineters,

A few months ago Dan Leeson posted here a report of the IRS denying a
depreciation deduction taken by two violinists for their bows. In the
latest DOS Orchestra report (047) it was reported that the ruling has been
overturned. One small victory against the IRS, for the time being.

Cheers,
Steve
===============================================================================

Internal Revenue Service: Musicians 2, IRS Zip
----------------------------------------------

Two musicians with the New York Philharmonic who won a landmark
tax case against the Internal Revenue Service won an appeal of
that decision by the IRS to a Federal appeals court.

The original decision, made in August 1994, restored the
deduction that Richard and Fiona Simon claimed regarding their
two Tourte bows. The Simons had claimed 21% depreciation on the
bows, which cost $21,500 and $20,000. The IRS claimed that the
bows were works of art that appreciated with the passage of
time, while the Simons, represented by Arthur Pelikow of New
York City, contended that the bows were tools that were subject
to wear and tear and thus depreciable under revisions to the
tax code made in 1981.

The 2-1 decision by the U.S. Court of Appeals for the Second
Circuit was handed down on October 13. It leaves the IRS with
the options of going to the Supreme Court or trying to have the
law changed by Congress.

Judge Ralph K. Winter, writing for the majority, found that the
bows were tangible business property of a "character subject to
the allowance for depreciation." He rejected the IRS's key
argument that the phrase "of a character subject to
depreciation" required a showing by taxpayers that the property
in question has a "determinable useful life" as was required by
tax regulations prior to 1981. In examining the legislative
history of the Economic Recovery Tax Act of 1981, Winter
concluded that "when a coherent regulatory system has been
repudiated by statute, as this one has, it is inappropriate to
use a judicial shoehorn to retain an isolated element of the
now-dismantled regulation." He also wrote that, if the ruling
gives "favorable treatment to past investment decisions that
some regard as wasteful, such as a law firm's purchase of
expensive antique desks," it was nonetheless "not our function
to draw subjective lines between the wasteful and the
productive."

Some of the Simon's ongoing legal expenses have been underwritten
by Local 802 (New York City) of the American Federation of
Musicians and by the International Conference of Symphony and
Opera Musicians, which is continuing to encourage its members
to contribute to a fund set up by Local 802 for this purpose.