Rev. Rul. 68-134

Advice has been requested whether in view of the decision rendered by the United States Court of Appeals in Zelco, Inc. v. Commissioner , 331 F.2d 418 (1964), the principle established in Revenue Ruling 59-249, C.B. 1959-2, 55, applies to a taxpayer engaged in the business of leasing new commercial trucking equipment.

In Revenue Ruling 59-249 it was held that the cost of tires and tubes on new commercial trucking equipment purchased and used by the taxpayer in motor freight transportation is deductible in full as ordinary and necessary business expense in the taxable year of purchase and payment (or accrual), if such tires and tubes are consumable within a year.

Subsequently in Zelco, Inc. v. Commissioner , 331 F.2d 418 (1964) the United States Court of Appeals for the First Circuit held that a taxpayer who purchased and leased vehicles to other parties who were required to replace tires worn out during the term of the lease was likewise not required to treat the tires as a part of the leased vehicles and to depreciate their cost over the entire life of the lease.

In reaching its decision the Court indicated there was no valid basis for a conclusion that the principle of Revenue Ruling 59-249 is applicable to a purchaser-user of new commercial trucking equipment but not applicable to a purchaser lessor under otherwise similar facts.

Accordingly, where the facts and circumstances are otherwise substantially similar to those set forth in Revenue Ruling 59-249 the principle established in that ruling will also be applied to tires in the case of a taxpayer who is a purchaser-lessor of new commercial trucking equipment.

Revenue Ruling 59-249 is amplified.