Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 69-60

1969-1 C.B. 49

Sec. 162

IRS Headnote

Costs incurred by a railroad company to acquire and apply "Automatic Car Identification" labels on its existing railroad freight-train cars are deductible as ordinary and necessary expenses.

Full Text

Rev. Rul. 69-60

Effective January 1, 1970, all railroad freight-train cars used in interchange are required by the Association of American Railroads to be identified by "Automatic Car Identification" labels. A railroad company started identifying its existing cars with such labels in 1968. The labels, color-coded and reflective, will activate wayside electro-optical scanning devices and data processing equipment to record and transmit certain information from each car as it passes. The labels are to be applied to the sides of the existing railroad cars and serve only as additional means of identification.

Held, the costs incurred by the railroad in 1968 to acquire and apply "Automatic Car Identification" labels to its existing railroad freight-train cars are deductible as ordinary and necessary business expenses within the meaning of section 162 of the Internal Revenue Code of 1954 and section 1.162-1(a) of the Income Tax Regulations.