The opinion of the court was delivered by: Ware, District Judge.
ORDER GRANTING DEFENDANT'S CROSS-MOTION FOR SUMMARY JUDGMENT
AND DENYING PLAINTIFFS' CROSS-MOTION FOR SUMMARY JUDGMENT
This action was filed by Plaintiffs as the result of the Internal Revenue Service's ("IRS") disallowance of Granite Rock Company's 1995 tax deduction of approximately $20 million dollars for the cost of a new conveyor belt system. Both parties agreed that the case could be resolved by summary judgment and filed cross-motions for summary judgment. Plaintiffs argue that the deduction is proper based on the receding face doctrine, while the IRS argues that the deduction is not allowed based on such doctrine and that the costs of the new conveyor belt system must be charged to capital and recovered through depreciation or other similar deductions over a period of years.
The Court heard the parties' cross-motions for summary judgment on January 27, 2003. Attorney Thomas Carlucci appeared on behalf of Plaintiffs and Assistant United States Attorney Thomas Moore appeared on behalf of Defendant. Based on all papers filed to date, as well as on the oral argument of counsel, the Court grants Defendant's cross-motion for summary judgment and denies Plaintiffs' cross-motion for summary judgment for the reasons set forth below.
Plaintiff Granite Rock Company ("Plaintiff")*fn1 is in the business of mining and selling granite rock products for use in road construction and as building material for the last decade. Plaintiff obtains the raw granite from its quarry in Aromas, California, known as the A.R. Wilson Quarry ("Wilson Quarry"). In order to mine the granite, Plaintiff must first remove the dirt and sandy clay, commonly referred to as the "overburden." The overburden must be removed, transferred and stockpiled in a dumpsite away from the mine pit so that the granite can be efficiently extracted from the mining face. Once extracted, the granite is temporarily stockpiled on the floor of the quarry. It is then fed into an in-pit primary crusher and crushed into different sizes. The crushed granite is then taken to a processing plant where it is further refined to make Plaintiffs's saleable product. The mining face and the processing plant are located about one mile apart. The crushed granite is transported from the face to the processing plant by a conveyor belt system.
Accordingly, Plaintiff planned and constructed a new conveyor belt system which now serves as the exclusive means for transporting overburden from the face of the mine to another dumpsite adjacent to the Wilson Quarry, known as the "Brigantino dumpsite." The new conveyor belt system began operating in September of 1995. Plaintiff claimed a deduction in tax year 1995 for the total cost of the new conveyor belt system, which was $21,361,042, arguing that the new system satisfies all of the requirements of the receding face doctrine.
The IRS issued a Notice of Final S Corporation Administrative Adjustment ("FSAA") to Plaintiff which disallowed the deduction of the total cost of the project. The IRS takes the position that the cost of the Brigantine Project may not be deducted in full but must be depreciated over the useful life of the new conveyor belt system because the system does not fall under the receding face doctrine. Plaintiff paid the assessed tax and then filed a complaint in this Court seeking a readjustment of the tax liability. The parties now seek summary judgment in their favor.
Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The purpose of summary judgment "is to isolate and dispose of factually unsupported claims or defenses." Celotex v. Catrett, 477 U.S. 317, 323-324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
The moving party "always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any' which it believes demonstrate the absence of a genuine issue of material fact." Id. at 323, 106 S.Ct. 2548. If he meets this burden, the moving party is then entitled to judgment as a matter of law when the non-moving party fails to make a sufficient showing on an essential element of his case with respect to which he bears the burden of proof at trial. Id. at 322-23, 106 S.Ct. 2548.
The non-moving party "must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). The non-moving party cannot defeat the moving party's properly supported motion for summary judgment simply by alleging some factual dispute between the parties. To preclude the entry of summary judgment, the non-moving party must bring forth material facts, i.e., "facts that might affect the outcome of the suit under the governing law . . . Factual disputes that are irrelevant or unnecessary will not be counted." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The opposing party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 588, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
The court must draw all reasonable inferences in favor of the non-moving party, including questions of credibility and of the weight to be accorded particular evidence. Masson v. New Yorker Magazine, Inc., 501 U.S. 496, 111 S.Ct. 2419, 2434-35, 115 L.Ed.2d 447 (1991) (citing Anderson, 477 U.S. at 255, 106 S.Ct. 2505); Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 588, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); T.W. Elec. Service v. Pacific Elec. Contractors, 809 F.2d 626, 630 (9th Cir. 1987). It is the court's responsibility "to determine whether the `specific facts' set forth by the nonmoving party, coupled with undisputed background or contextual facts, are such that a rational or reasonable jury might return a verdict in its favor based on that evidence." T.W. Elec. Service, 809 F.2d at 631. "[S]ummary judgment will not lie if the dispute about a material fact is `genuine,' that is if the evidence is such that a reasonable jury could return a verdict for the nonmoving ...