Harrah's Club v. United States

81-1 USTC ¶ 9466, 1981 WL 15579 (1981)

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Harrah’s Club v. United States

United States Court of Claims
81-1 USTC ¶ 9466, 1981 WL 15579 (1981)

  • Written by Heather Whittemore, JD

Facts

Harrah’s Club of Reno (Harrah’s) (plaintiff) operated hotels and casinos in Reno, Nevada. Harrah’s also maintained a collection of antique automobiles, Harrah’s Automobile Collection (the Collection), containing approximately 1,000 automobiles that it restored to near-original conditions. Automobiles would stay in the collection for upward of 30 years and, once restored, were unlikely to need to be restored again. No restored automobile in the Collection had ever been restored again. Harrah’s often spent more money restoring the automobiles in the Collection than the automobiles were worth on the market. Harrah’s attempted to deduct the restoration costs that went beyond the automobiles market value from its income taxes as depreciations. Harrah’s reasoned that these excess restoration costs should be depreciable over the time that the restorations were useful to the business, between five and 10 years. The time estimate was based on a comment by a manager who estimated that after five years Harrah’s would want to replace an automobile in the Collection with a new one for promotional purposes. The United States government disallowed the deductions. Harrah’s sued for a refund, arguing that the deductions should have been allowed.

Rule of Law

Issue

Holding and Reasoning (Per curiam)

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