52 T.C. 478">*478 Respondent determined deficiencies in petitioners' Federal income taxes for the calendar years 1963, 1964, and 1965 in the following amounts: 52 T.C. 478">*479

The only issue remaining for decision is whether certain docks and the pilings which held them in place qualify as "tangible personal property" within the meaning of sections 48 and 179. ¹

FINDINGS OF FACT

Some of the facts have been stipulated and are found accordingly.

Shirley Morgan and Margaret Morgan were husband and wife. Shirley Morgan died on April 27, 1967. 1969 U.S. Tax Ct. LEXIS 110">*112 Margaret Morgan (hereinafter referred to only as Margaret) is a petitioner herein in her individual capacity as well as in the capacity of administratrix of her husband's estate.

Margaret resided in Inverness, Calif., at the time she filed her petition in this case. She and her husband filed joint Federal income tax returns for each of the 3 years involved with the district director of internal revenue, San Francisco, Calif.

Clifford M. Pedersen and Thelma Pedersen are husband and wife. They resided in Kentfield, Calif., at the time they filed their petition in this case. They filed joint Federal income tax returns for the years involved with the district director of internal revenue, San Francisco, Calif.

Shirley Morgan and Clifford Pedersen were general partners in Clipper Yacht Co. (hereinafter referred to as the partnership) during the years involved. Each owned a 50-percent interest. The partnership maintained its books and filed its Federal income tax returns on a calendar year basis.

The partnership's principal business activity is leasing docking facilities. The partnership owns the underwater land over which the docks are located. It also owns the adjacent land which1969 U.S. Tax Ct. LEXIS 110">*113 provides access to the docks. The land fronts on a portion of the shoreline of San Francisco Bay in Sausalito, Calif.

In 1964 the partnership expended $ 58,550.47 to construct new floating docks in its basin No. 1. That same year the partnership also expended $ 5,845.99 on similar floating docks in its basin No. 3. In 1965 the partnership expended $ 6,801.53 relating to its docks in basin No. 1.

52 T.C. 478">*480 The partnership's primary reason for using floating docks as berths for boats is their convenience to boat owners in boarding and disembarking from their boats. In waters of the San Francisco Bay area there is a tidal range of approximately 9 feet. Floating docks permit the boats and the docks to be at the same relative level regardless of the changing tides. Floating docks preclude the necessity of stepladders.

The floating portion of the dock in basin No. 1 consists of three walkways and approximately 86 "fingers," or extensions, attached to the walkways at regular intervals. The spaces between the fingers, or extensions, form the slips or berths for the individual boats. This entire portion of the dock floats by means of buoyancy units of expanded polystyrene foam.

The1969 U.S. Tax Ct. LEXIS 110">*114 partnership constructed the individual fingers and walkways for basin No. 1 in the materials yard adjacent to its main office. The fingers and walkways were built as individual units. Sometimes the construction was done in sections to facilitate handling. After their construction the components were floated into position and bolted together. The fingers were bolted to the walkways at five points.

The length of the fingers varies between 20 and 40 feet. The width of the fingers varies between 2 and 3 feet. Two of the walkways are parallel. One is approximately 290 feet long and the other is 125 feet long. They are both about 5 feet wide. The third walkway is approximately 5 feet wide and 270 feet long. It is connected perpendicularly to the other two walkways. The third walkway consists of two sections of equal length. The two sections are joined by another section which is at right angles to both of them.

The entire floating portion of the dock is primarily of wood construction. The frame is fir and the decking is cedar. A floating dock built from wood will generally last longer than a steel or concrete dock. Wood construction is better suited to withstand the stresses1969 U.S. Tax Ct. LEXIS 110">*115 of waves. The docks are virtually positioned with respect to lateral motion. The partnership tries to limit the lateral motion of the docks to no more than 12 inches in any direction. The docks rise and fall with the water level. Thus, they enable a secured boat or yacht to remain at the same level as the floating portion of the dock.

The dock in basin No. 1 is guided by 39 piles. Three of these piles are located at the dock's outer perimeter. The remaining 36 piles come up through holes in the floating portion of the dock. The piles resemble telephone poles and are approximately 38 inches in circumference. A floating piledriver rig drives the piles into the submerged bottom until the piles are stable. To prevent marine life from 52 T.C. 478">*481 boring into and deteriorating the wood fibers, the piles are pressure-impregnated with creosote. Another possible method of holding the dock in place would be by use of anchors and cables.

Gangways are used to provide access to the floating docks. One end of each gangway is hinged to a permanent pier on shore. The other end rides upon rollers which rest on the deck of the floating docks. The gangway can thus rise and fall with the tide.

1969 U.S. Tax Ct. LEXIS 110">*116 Floating docks, such as those in basin Nos. 1 and 3, are, as a matter of trade and banking custom, considered tangible personal property.

When floating docks are sold, the unpaid balance of the purchase price is normally secured by a conditional sale contract or by a security agreement under the Uniform Commercial Code. Deeds of trust or mortgages, security instruments associated with real property, are not used for this purpose.

All of the docks during the years in question appeared on the assessment rolls and tax bills of Marin County, Calif., as improvements to real property for California property tax purposes. The rate of tax is the same on "real property" as it is on "personal property."

On May 20, 1964, the partnership submitted applications to the City of Sausalito for two building permits. The permits related to construction of docks in basin No. 1 and reconstruction of docks in basin No. 3. The building inspector approved the permits on the same day as the applications were made. Both permits state that construction was necessitated by a tidal wave and storm damage.

With proper care and maintenance the floating docks have an estimated useful life of at least 20 years. 1969 U.S. Tax Ct. LEXIS 110">*117 If the flotation units are replaced as they deteriorate and planks are also periodically replaced, the docks could last for an even longer period of time.

Most of the docks could be removed and relocated without removing any piles. Withdrawal of piles would be necessary only in conjunction with the movement of certain portions of the docks to facilitate dredging operations. In such cases a floating crane would withdraw the necessary number of pilings.

The cost of the pilings, including their installation, was $ 5,000.

As noted above, in 1964 the partnership expended $ 58,550.47 constructing new floating docks in basin No. 1. In 1964 the partnership also expended $ 5,845.99 on similar floating docks in basin No. 3. The petitioners, on their respective joint income tax returns for 1964, claimed investment credits for such expenditures. Respondent has disallowed investment credits on the floating docks for the reason that the docks do not qualify as "tangible personal property" within the meaning of section 48.

52 T.C. 478">*482 In 1965 the partnership expended $ 6,801.53 relating to its docks in basin No. 1. The petitioners, on their respective joint income tax returns for 1965, claimed1969 U.S. Tax Ct. LEXIS 110">*118 investment credits on such expenditure. In addition, the partnership, on its partnership return for 1965, claimed additional first-year depreciation as to this expenditure. The respondent has similarly disallowed both the investment credit and the additional first-year depreciation with respect to the $ 6,801.53.

OPINION

The only issue for decision is whether the floating docks and the pilings on which they ride with the tides qualify as "tangible personal property" within the meaning of sections 48 and 179.

Section 48(a)(1) provides, in part, that for property to qualify as "section 38 property" for purposes of the investment credit, it must be either "tangible personal property" or "other tangible property" used in certain business activities. Under section 179 property will not qualify for the additional first-year depreciation allowance unless it is "tangible personal property."

Petitioners have not presented evidence or contended on brief that the floating docks or pilings qualify for the investment credit as "other tangible property." The only question before the Court, therefore, with regard to the investment credit issue, as well as the additional first-year depreciation1969 U.S. Tax Ct. LEXIS 110">*119 issue, is whether the docks are "tangible personal property."

Neither section 179 nor section 48 defines the term "tangible personal property." The definitions of "tangible personal property" in sections 1.48-1(c) and 1.179-3(b), Income Tax Regs., are substantially identical. Both provisions state that the term means tangible property except land, and improvements thereto, such as buildings or other inherently permanent structures thereon. Both provisions further state that local law shall not be controlling for purposes of determining whether property is or is not "personal." Although both provisions give examples of nonqualifying property, only in section 1.48-1(c) of the regulations are docks mentioned: "Thus, buildings, swimming pools, paved parking areas, wharves and docks, bridges, and fences are not tangible personal property."

Respondent contends that the floating docks, together with the pilings, are inherently permanent land improvements within the meaning of the foregoing provisions in respondent's regulations. We do not agree. The reference to docks in respondent's regulations does not contemplate structures such as the floating docks under consideration in the case1969 U.S. Tax Ct. LEXIS 110">*120 at bar.

52 T.C. 478">*483 The evidence presented at the trial established that the floating docks are not inherently permanent structures. The Court reached the same conclusion upon making a personal inspection of the docks. They float on the water as independent units, rising and falling with the tide. The purpose of the pilings is only to limit lateral motion of the docks. The docks are portable. They can readily be removed and placed in other locations or configurations. For instance, finger units of different lengths can be interchanged. An existing section of walkway and accompanying finger units can be moved to a new location in the same basin while remaining part of the same complex of floating docks. As for moving the docks to new locations, that can be accomplished by towing them on the water. Most of the pilings would not necessarily have to be first removed.

Respondent takes the position that the floating docks are inherently permanent structures because they are permanently attached or affixed to land. Respondent sets forth three methods in which the docks are so attached. The first is by gangways which are hinged to permanent piers on shore and rest on the floating1969 U.S. Tax Ct. LEXIS 110">*121 docks by means of rollers. The second method is the connection of electrical and plumbing utilities to the docks from land-based sources. The third is the attachment of the docks to pilings.

Respondent mistakenly assumes that annexation to land precludes classification of property as "tangible personal property" under section 48. Respondent's regulations even describe various kinds of property which are considered "tangible personal property" even though they are annexed to the ground:

Thus, such property as production machinery, printing presses, transportation and office equipment, refrigerators, grocery counters, testing equipment, display racks and shelves, and neon and other signs, which is contained in or attached to a building constitutes tangible personal property for purposes of the credit allowed by section 38. * * *

See sec. 1.48-1(c), Income Tax Regs.

Notwithstanding respondent's mistaken assumption, we still do not think the docks are attached or affixed to land. The gangways merely rest on the docks by means of rollers. The electrical and plumbing connections are not significantly different from those of ships and boats which depend on land-based utilities 1969 U.S. Tax Ct. LEXIS 110">*122 when the vessels are docked. As for the fact that pilings are used to guide the docks, we do not think such fact converts the docks into permanent fixtures.

Contrasted to the docks, the pilings are permanent. The partnership drove the piles in basin No. 1 as deep as 15 feet into the mud at the bottom of San Francisco Bay. Piledrivers were used to drive the piles into the bottom or to later remove them. We therefore hold that the pilings are not "tangible personal property" within the meaning of section 48 or section 179.

52 T.C. 478">*484 Respondent argues that the floating docks, together with the pilings, function as one unit. He then insists that we must decide this case on an "all nor nothing" basis. In our case we think the pilings are components separate from the docks to which they are attached. The pilings are not an integral part of the docks. They are used to serve the same purpose as anchors attached to cables.

Finally, in the instant case respondent relies upon Rev. Rul. 67-67, 1967-1 C.B. 6, as authority for his position. This ruling, published after the years in issue in this case, holds that the very docks in question are not1969 U.S. Tax Ct. LEXIS 110">*123 "tangible personal property" for purposes of the investment credit. We dismiss this argument by pointing out that the revenue ruling is no more binding nor has any more legal force than the opening statements of counsel at the time of trial of this case. Henry C. Beck Builders, Inc., 41 T.C. 616">41 T.C. 616, 41 T.C. 616">628 (1964).

Decisions will be entered under Rule 50.