*290OPINION.
Leech :The broad question here is when is income realized to the lessor from the erection of a building on his land by the lessee, which is not subject to removal on termination of the lease. The Treasury *291regulations1 provide that the income must be reported either in the year of completion of the building or prorated over the life of the lease. The respondent has determined a deficiency on the latter basis. The petitioner claims that the regulation is invalid and that income is not realized until the property is sold or the lease is forfeited or expires.
These regulations under attack are grounded upon the view, expressed if not held, in Miller v. Gearin, 258 Fed. 225, and Cryan v. Wardell, 263 Fed. 248.
These regulations have, in effect, been sustained. Shelby D. Scott, 9 B. T. A. 1219; Joseph L. B. Alexander, 13 B. T. A. 1169; Cataract Ice Co., 23 B. T. A. 654; W. H. Martin, 24 B. T. A. 813. Cf. Louise C. Slack et al., Executors, 35 B. T. A. 271.
It is true the Circuit Court of Appeals for the Second Circuit in Hewitt Realty Co. v. Commissioner, 76 Fed. (2d) 880 (1935), is contra. That opinion has had the respectful consideration of this Board. It offers what may seem to be a persuasively practical answer to a difficult problem. However, no other similar authority has come to our attention. And, the court, even in its decision of that case, was not unanimous. See dissenting opinion of Chase, Judge.
Therefore, we adhere to our position and sustain the validity of the contested regulations.
It is suggested in petitioner’s brief, as an alternative reason why no income was realized in the year involved that, under the lease, title to the building did not pass to the lessor until expiration or forfeiture of the lease. This argument has no merit, since that was not the effect of the present lease. Cf. Joseph L. B. Alexander, supra.
Reviewed by the Board.
Decision will be entered for the respondent.
Murdock dissents.Article 63 of Regulations 74, as amended, reads in part as follows:
“Improvements by lessees. — When buildings are erected or improvements made by a lessee in pursuance of an agreement with the lessor, and such buildings Or improvements are not subject to removal by the lessee, the lessor may at his option report the income therefrom upon either of the following bases:
“(a) The lessor may report as income at the time when such buildings or improvements are completed the fair market value of such buildings or improvements subject to the lease.
“ (b) The lessor may spread over the life of the lease the estimated depreciated value of such buildings or improvements at the expiration of the lease and report as income for each year of the lease an aliquot part thereof.”