dissenting: It seems to me that the decision of the Second Circuit in the Hewitt Realty case, 76 Fed. (2d) 880, gives a sound solution to the question here involved. The substance of the *292lidding in that case is that the erection of a building by a lessee does not result in realization of income to the lessor; the realization of income, if any, occurs when the lessor sells. This view, as stated by Judge Learned Hand, author of the majority opinion, “answers every fiscal necessity far more directly and simply than any other formula.”
The lease in the instant case was for a period of over thirty years. Under the view expressed in the Commissioner’s regulations and approved in the majority opinion, it is necessary to look into the future to the time when the lease terminates and determine the value of the building after taking into account the ravages of time. In many cases of long-term leases the original term extends beyond the useful life of the improvements. Some of them involve definite provisions for renewal. There are always the possibilities of termination prior to the expiration of the agreed term, and accelerated depreciation and obsolescence resulting from causes unforseeable when the lease is executed. These are factors that complicate any attempted application of the Commissioner’s regulations. But what is more serious, they show the impossibility of determining with any fair certainty the amount to be treated under the regulations as realized income. A promise to turn over possession of a building many years hence, and subject to the many contingencies necessarily in-wolved .in any transaction extending over a period of years, does not seem to be in any proper sense the present equivalent of cash. Cf. Burnet v. Logan, 283 U. S. 404. The difficulty of determining as a matter of fact the value of improvements is recognized in both opinions filed in the Hewitt case. The majority opinion obviates the •difficulty and offers a sound solution. It treats as income the full amount eventually realized when it is actually realized. Anything short of this does not meet the test of realized income with which the taxing act is concerned. For these reasons, I think we should adopt the principle of the Hewitt Realty case and decline to follow the earlier cases that hold otherwise.
Sternhagen and Tyson agree with this dissent.