Document: 350 U.S. 456 76 S.Ct. 493 100 L.Ed. 545 MILLINERY CENTER BUILDING CORP., Petitioner,v.COMMISSIONER OF INTERNAL REVENUE. No. 255. Argued March 1, 1956. Decided 26, Mr. Bernard Weiss, New York City, for petitioner. Hilbert P. Zarky, Washington, D.C., respondent. Justice FRANKFURTER delivered the opinion of Court. 1 This case involves an interpretation § 23(a)(1)(A) Internal Revenue Code 1939, as amended 26 U.S.C.A. 23(a)(1)(A), providing deduction from gross income, in computing net all 'ordinary and necessary expenses paid or incurred * carrying on any trade business *.' The Commissioner determined a deficiency petitioner's excess-profits tax 1945; petitioner sought redetermination its liability Tax Court, which made following findings fact. In April 1924, leased land City 21 years, with option to renew lease two further 21-year periods. accordance terms lease, it erected 22-story loft building at cost $3,000,000. 1935, provided annual rental $118,840. Title was petitioner, but eventual termination would vest, without payment, lessor, lessor's option. lessor could also require remove that time. Petitioner had obligation, destruction building, rebuild own cost. During first period fully depreciated entire $3,000,000 building. 1945, exercised until 1966. 2 May entered into agreement owner whereby purchased fee obtained release obligations renewed lease. price $2,100,000. Court found value land, unimproved, $660,000 when by 1945. 3 principal issues raised relate attempt deduct $1,440,000—the difference between purchase under 1945 unimproved land—as ordinary expense doing business. held not be so deducted, amortized over remaining term cancelled no depreciation taken because already been separated land. T.C. 817. Six judges dissented ground '(s)ome part should allocated additional rights acquired page 826. 4 On petition review, Appeals Second Circuit reversed remanded. It affirmed refusal permit 23(a), holding amount added asset purposes depreciation. Rejecting argument allowed amortize $1,440,000 unexpired accepted alternative useful life allowed. Stating '(o)n present state record we cannot determine how much $2,100,000 is properly building,' remanded fix respective values. Cir., 221 F.2d 322, 324. writ certiorari review disallowance claim or, alternatively, amortization Government did seek allowance portion allocable economic life. Because apparent conflict decision this Sixth Cleveland Allerton Hotel, Inc., v. Revenue, 166 805, granted certiorari, limited questions set forth margin.1 5 Under renew, similar constructed. introduced evidence show rent paying greatly excess fair vacant, contends owned therefore purpose avoiding excessive rentals transaction, asserts, involved current expenditure, vacant represents what willing pay avoid onerous 6 Petitioner's 'owned' based loose misleading use 'owned.' only way continue after initial renewing circumscribed control make remainder life, payment stated rent. respect irrelevant. using improved building; tendered actually leasing. A complementary feature interests elimination obligation presumably reflected situation. Whatever possible merit contention might have were there proof can await such case. acquiring complete taken.2 7 claims even if get 23(a) loss 23(f), above extinguished What however, both has yet fixed acquisition These are assets lives having reference Successive steps securing then purchasing reversion result whole one time asset, wasting asset. 8 contention, consummated 1944 before expired, year. But whether about expire just renewed. case, enhanced right receive depressed near end. other many years run. although possibly some bargaining power situations, sum total same each assets—land building—whose will their lives, 9 Accordingly, affirm judgment Circuit, leaving allocation still made. 10 Affirmed. "1. Where lessee, valuable acquires relieved considers burdensome may lessee date United States 1939 23(f) transaction profit compensated insurance otherwise. "2. alternative, lessee-petitioner consider nature prepayment years?" 820, 79. asserted, argue, permissibility 23(f). Such assertion apparently premised assumption commutation payments discussion unnecessary.

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