## Facts

- The Internal Revenue Service addressed whether works of art placed in offices and other business locations qualify for depreciation deductions.
- Earlier administrative guidance had denied depreciation for expensive art or “curios” used to furnish an office.
- Taxpayers claimed that office artwork constituted property used in a trade or business and was subject to wear and tear.
- The ruling focused on “valuable and treasured” works of art—high-value pieces whose worth derives primarily from artistic or collector qualities.
- Such artwork was described as typically expected to retain or increase value over time rather than predictably exhaust through use.
- A key factual consideration was whether the artwork had a reasonably estimable, finite useful life that could support depreciation computations.

## Issues

1. Whether “valuable and treasured” works of art used in a trade or business constitute depreciable property under I.R.C. § 167.
2. Whether physical deterioration or changes in condition of fine art establishes a determinable useful life for depreciation purposes.

## Decision

- The IRS concluded that depreciation deductions are generally not allowable for “valuable and treasured” works of art used in a business.
- The IRS reasoned that such artwork ordinarily does not have a determinable useful life.
- The IRS stated that physical condition may affect value but ordinarily does not limit or determine the artwork’s useful life for depreciation purposes.

## Legal Principles

- Depreciation under I.R.C. § 167 requires property used in a trade or business (or held for income production) to have a determinable useful life over which cost is recovered.
- A taxpayer seeking depreciation must be able to apply depreciation concepts that depend on a finite useful life (and, under then-applicable rules, salvage value).
- “Valuable and treasured” works of art ordinarily lack a determinable useful life because their economic usefulness as art is not predictably exhausted over a measurable period.
- Physical deterioration or imperfections that influence market value do not, by themselves, establish a determinable useful life for fine art.

## Conclusion

The IRS determined that, even when displayed or used in a business setting, “valuable and treasured” fine art generally is not depreciable under § 167 because it lacks a determinable useful life necessary to allocate cost through depreciation.


Rev. Rul. 68-232, 1968-1 C.B. 79 (1968)