272 (1955),[1] was a case in which the court considered whether the $8,224 spent to construct a drive-in theatre's drainage system was deductible as an ordinary and necessary business expense, as a loss or if it was a non-depreciable capital expenditure.

The petitioner claimed that the entire cost of the drainage system was deductible in 1950 as an ordinary and necessary business expense incurred in the settlement of a lawsuit.

It should have included proper drainage in its original construction plan, which certainly would have been considered a Capital Expenditure for tax purposes.

Instead, under threat of litigation, the petitioner corrected the problem a year later, and sought to deduct the cost as an ordinary and necessary business expense, or a loss.

Focusing on the fact that there was no sudden, unforeseeable or catastrophic factor that caused the construction, the court held that this was not an ordinary business expense or a deductible loss.

Contrast this decision with Midland Empire Packing Company v. Commissioner,[2] in which the Tax Court held that an expenditure to line basement walls with cement to prevent further oil leakage constituted a repair and was thus deductible as an ordinary and necessary business expense.

[3] Judge McAllister joined the dissent reasoning that had the petitioner opted to pay damages to the neighbors, rather than completing the repair, the settlement expenses could have been deducted.