00-2668 U.S. Freightways Corp. v. Commissioner of Internal Revenue

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“Even the Commissioner concedes the ordinariness of Freightways’ FLIP expenses for companies in the trucking business. Not only are they ordinary, but as Freightways points out, they recur, with clockwork regularity, every year. Both this court and the IRS have recognized this type of regularity as something that tends to support a finding of deductibility. See Encyclopedia Britannica, 685 F.2d at 216-17; Tech. Adv. Mem. 9645002 (June 21, 1996). Recurrent expenses are more likely to be ordinary and necessary business expenses. See, e.g., Tech. Adv. Mem. 7401311140A (Jan. 31, 1974) (‘We believe the Davee principle concerning the recurrent nature of an expense serves as a useful basis for distinguishing ordinary business expenses from expenses that are in the nature of capital expenditures, regardless of what type of expense may be at issue.’). Because they recur every year, there is less distorting effect on income from future tax year benefits over time. In every year, that is, while Freightways will be able to reap the tax advantage of deduction for some part of the following twelve months, it will have ‘lost’ the deductions for the months covered by the prior year’s licenses, for which it has already received the benefit.”

Reversed and remanded.

Appeal from the United States Tax Court, Nims, J., Diane P. Wood, J.