[1] Idaho Power Co., used its own equipment and employees to improve and add to its capital facilities.

Whether, for federal income tax purposes, a taxpayer is entitled to a deduction from gross income under § 167(a) of the Code[2] for depreciation on equipment the taxpayer owns and uses in the construction of its own capital facilities, or whether the capitalization provision of § 263(a)(1) of the Code[3] bars the deduction.

Construction-related expense items, such as tools, materials, and wages to construction workers are treated as part of the cost of acquisition of a capital asset.

§ 263(a)(1) of the Internal Revenue Code denies a deduction for any amount paid out for construction or permanent improvement of facilities.

Direct costs include raw materials and wages paid to builders or other production workers.

Text of Commissioner v. Idaho Power Co., 418 U.S. 1 (1974) is available from: Findlaw Google Scholar Justia Library of Congress Oyez (oral argument audio)