Massey Motors, Inc. v. United States
A 1960 Supreme Court useful-life and salvage case about automobiles held for short periods and then resold. It is historical background. MACRS later replaced useful-life depreciation for most tangible property.
Educational information, not tax advice.
Updated 2026-10-14
Key takeaways
- The holding concerns pre-ACRS useful-life and salvage depreciation of automobiles.
- Do not use Massey to pick a MACRS recovery period or to ignore salvage-is-zero under §168.
- The case is kept as history of why statutory class lives replaced taxpayer-by-taxpayer useful-life fights.
- Educational information, not tax advice.
Case record
- Court
- U.S. Supreme Court
- Citation
- 364 U.S. 92 (1960)
- Decision date
- 1960-06-27
- Facts
- The Court consolidated two automobile cases. In Massey, a Chrysler dealer assigned new cars to employees and rented others, then sold them after modest mileage or when new models arrived, often at a gain. In the companion Evans case, a lessor supplied cars to a U-Drive operation and typically sold short-term rental cars after about 15 months. Both taxpayers claimed depreciation over a multi-year physical life with little or no salvage, converting much of the later resale into capital gain. The Commissioner measured useful life by the period each taxpayer actually kept the cars and treated expected wholesale resale value as salvage.
- Issue
- Under the 1939 Code and the then-applicable regulations, is useful life the asset’s full physical or economic life, or the period the taxpayer reasonably expects to use the asset in its business, and does salvage include expected resale value rather than junk value?
- Holding
- Useful life is the period the asset is reasonably expected to be employed in the taxpayer’s business. The depreciation base is cost less estimated salvage, resale, or second-hand value at the expected time of disposal. The Fifth Circuit was affirmed in Massey and reversed in Evans.
- Reasoning
- Justice Clark wrote that depreciation is meant to allocate cost to the periods the taxpayer uses the asset, not to let the taxpayer recover more than cost minus expected resale. Congress did not intend taxpayers to deduct inflated depreciation from ordinary income and then report the matching “profit” on resale at capital-gain rates. When experience shows the taxpayer will not keep the asset for its full economic life, salvage is the expected second-hand value, not scrap.
- Relevance to cost segregation
- This is historical useful-life law. Under ACRS and MACRS, recovery periods are statutory, salvage is treated as zero, and class assignment — not a private useful-life study — drives building depreciation. Massey does not classify structural components or land improvements.
Massey Motors, Inc. v. United States, 364 U.S. 92 (1960), is a Supreme Court decision about cars, not buildings. The taxpayers used automobiles in rental and dealer operations for short periods and sold them as used cars. They depreciated the cars as if each car would be worn out in their business, with little salvage. The Commissioner said useful life was the much shorter period the cars actually stayed in the fleet, and that salvage was the expected wholesale price.
The Court agreed with the Commissioner. Depreciation, it said, protects the taxpayer from loss of capital used up in the business; it is not a device for manufacturing ordinary deductions that reappear as capital gain when the same asset is sold. If the taxpayer’s own practice is to cycle cars every year or two, the “useful life in the business” is that cycle. The expected resale price is salvage, even if the car is far from junk.
The opinion is useful today only as contrast. ACRS and then MACRS replaced that regime for most tangible property. Section 168 assigns recovery periods, methods, and conventions. Salvage is treated as zero. Publication 946 reproduces class lives from Rev. Proc. 87-56. A cost segregation study assigns those statutory classes. It does not reinvent a Massey-style useful life for a wall, a chiller, or a parking lot.
Simon later held that, under ACRS, a taxpayer did not have to prove a determinable useful life for tangible personal property that suffered wear and tear in a trade or business. That is the other bookend: Massey is the old matching system; Simon and §168 are the statutory-recovery system. Neither case decides whether a building item is personal property or a structural component.
This page is educational information, not tax advice. Treat Massey as historical context (flag F-15). It is not authority for classifying a building component as 5-year or 39-year property.
Historical context only
The 1939 Code allowed a “reasonable allowance” for exhaustion of property used in the trade or business. Regulations defined that allowance as the amount that, plus salvage, would recover cost over useful life. Massey construed those words. ACRS (1981) and MACRS (1986) were enacted in part to end useful-life and salvage disputes of that kind.
Cost segregation still involves facts — what the item is, how it is attached, what it serves — but the recovery period, once the class is chosen, comes from the statute and revenue procedures, not from a taxpayer’s estimate of physical life.
Current law
Section 168 assigns recovery periods, methods, and conventions. Publication 946 reproduces class lives from Rev. Proc. 87-56. Salvage is treated as zero under MACRS. A study that quotes Massey to shorten a building life is misusing the case.
How a study should use the case
Use Massey as the historical contrast, not as a method. The Court matched cost to the period the taxpayer actually kept automobiles and treated expected wholesale resale as salvage. ACRS and MACRS replaced that matching system for most tangible property. A cost segregation study assigns statutory classes; it does not invent a private useful life for a wall or a parking lot.
Simon is the other bookend: under ACRS, wear and tear in business use could support depreciation without a separate useful-life trial. Neither opinion classifies structural components. Flag F-15 is the reason this page stays labeled historical.
Educational information, not tax advice. The property in Massey was automobiles held for short periods, not buildings.
Verification. Verified from the Justia U.S. Reports text (argued March 30, 1960; decided June 27, 1960). Low relevance to current cost segregation. Labeled historical per flag F-15.
Sources
- 1
- 2
- 3IRS Publication 946 — How To Depreciate Property (2025)(opens in a new tab)
Appendix B reproduces the Rev. Proc. 87-56 class lives.