Court Opinion

ID: 4588651
Source: CourtListenerOpinion
Date Created: 2020-11-20 18:42:30.476718+00
Date Added: 2024-06-11T07:50:07.234334
License: Public Domain

JACOB CONN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Conn v. CommissionerDocket No. 11978.United States Board of Tax Appeals16 B.T.A. 73; 1929 BTA LEXIS 2652; April 18, 1929, Promulgated 1929 BTA LEXIS 2652">*2652  1.  LEASEHOLD - EXHAUSTION. - Petitioner acquired on May 15, 1916, an assignment of a leasehold having 8 years and 15 days to run, for which he paid $15,000 and assumed the obligations in respect to rents, etc.  On January 1, 1921, the lessor gave to the petitioner a new leasehold agreement covering the last 3 years and 5 months of the original period.  Held, for purposes of a deduction for exhaustion for the year 1919 the exhaustion should be computed upon the leasehold period of 8 years and 15 days.  2.  INTEREST INCOME. - Testimony of petitioner that during the year he owned no interest-bearing securities and received no interest other than on bank deposit balances, and as to the amount of interest on such balances, held to establish that his interest income during the year was not in excess of $150.  3.  BUSINESS DEDUCTIONS. - Testimony held sufficient to establish that the cost of various supplies purchased by the petitioner in connection with the conduct of a moving picture theatre during 1919 was $1,412.04.  William A. Needham, Esq., for the petitioner.  L. L. Hight, Esq., for the respondent.  TRUSSELL 16 B.T.A. 73">*73  The petitioner, 1929 BTA LEXIS 2652">*2653  a resident of Providence, R.I., seeks a redetermination of a deficiency amounting to $1,289.51 in income taxes for the calendar year 1919, alleging error with reference to various items of income or expense, all of which are determined by stipulation of the parties save three, purely questions of fact, which we decide upon the record, namely, (1) the amount of income from interest received, 16 B.T.A. 73">*74  (2) the amount of deduction allowable for the ratable proportion of the cost of a leasehold, (3) the amount of allowable deduction for operating supplies.  FINDINGS OF FACT.  On May 15, 1916, petitioner purchased a leasehold of a moving picture theatre property for which he paid $15,000 and assumed rental and other like obligations for a period of 8 years and 15 days.  Thereafter, on January 1, 1921, the lessor gave to the petitioner a modified lease agreement covering the last 3 years and 5 months of the same period.  The gross income and deductions of the petitioner for the taxable year determined in accordance with stipulation of counsel and evidence produced at the trial, are as follows: Miscellaneous income:From sale of securities (stipulated)$4,012.58Rents received (stipulated)$7,250.00Less depreciation on rented property(stipulated)1,600.005,650.00Interest received (determined upon theevidence)150.00Dividends received (stipulated)286.2510,098.83Gross income of moving picture theaterbusiness (stipulated)36,106.01Total of operating expenses agreed toby counsel$36,387.85Cost of operating supplies determinedaccording to testimony1,412.04Exhaustion of leasehold1,865.2939,665.18Loss from operation of theater3,559.17Net income6,539.661929 BTA LEXIS 2652">*2654  The petitioner was entitled to a personal exemption of $3,200.  The petitioner filed his return upon a basis of the calendar year and kept his books of account on a basis of cash receipts and disbursements.  OPINION.  TRUSSELL: The testimony in this case clearly establishes that petitioner during the calendar year 1919 had no sources of interest income other than that credited upon his bank-deposit balances and that such credits were not in excess of $150.  It also establishes that certain expenses of operating his theatre for the purpose of various supplies for such business aggregated $1,412.04, making a total expense of such theatre operations $39,665.18.  16 B.T.A. 73">*75  The issue in respect to exhaustion of leasehold is whether the modification of the original lease agreement on January 1, 1921, so reduced the period of the original lease as to warrant, for the year 1919, an exhaustion deduction on the basis of 5 years and 15 days instead of 8 years and 15 days.  To our minds the record clearly establishes that the lease term acquired and for which the $15,000 purchase money was paid, covered a period of 8 years and 15 days and that the exhaustion deduction should be computed1929 BTA LEXIS 2652">*2655  upon that basis.  Judgment will be entered pursuant to Rule 50.