*1039OPINION.
Teammell :The petitioner contends that the entire cost of the contracts involved herein is an ordinary and necessary business expense for the year 1922, which it is entitled to deduct in computing its net income for that year. The respondent, however, urges that each of those contracts constitutes a capital asset; that petitioner acquired under each contract a property right in the nature of an option which continued and remained valuable after the year 1922, in the case of each contract not terminated in that year, and that no deduction of any part of the cost of the contract is allowable until the player who is a party thereto is released, or until the contract is sold, in which latter event gain will be realized or loss sustained, depending upon whether the sale price is greater or less than the cost of the contract.
It is well settled that if these contracts represent capital assets and were exhausted by the passage of time or otherwise, the petitioner is entitled to spread the amount paid for each contract over the *1040determinable period of its life, and to deduct an aliquot part thereof in each year. Appeal of Grosvenor Atterbury, 1 B. T. A. 169; Appeal of Atlantic Carton Corporation, 2 B. T. A. 380; Philip Henrici Co. v. Reinicke, 3 Fed. (2d) 34.
From a consideration of the facts, we are convinced that these contracts represent capital expenditures and may not be treated as an ordinary and necessary business expense, chai’geable against current income. Paragraph 1 of the uniform contract provides as follows:
Renewal
7. (a) Any time prior to March 1st, 1923 by written notice to the Player, the Club or any assignee thereof may renew this contract for the term of that year except that the salary rate shall be such as the parties may then agree upon, or, in default of agreement, such as the club may fix.
(6) In default of agreement, the Player will accept the salary rate thus fixed or else will not play during said year otherwise than for the Club or for an assignee hereof, subject to the right of appeal as provided in paragraph 8.
(e) The reservation to the Club of the valuable right thus to fix the salary rate for the succeeding year and the promise of the Player not to play during said year otherwise than with the Club or an assignee hereof, have been taken into consideration in determining the salary specified herein and the undertaking by the Club to pay said salary is the consideration for both the reservation and the promise.
It seems clear to us that the foregoing provisions vested in the Club much more than the mere right to negotiate with the player for his services during the succeeding year. By the provisions above quoted, petitioner acquired, for a valuable consideration, the right to renew the contract for the succeeding year upon the same terms and conditions, except that the salary rate should be such as the parties might agree upon, or in default of agreement, such as the petitioner might fix, subject only to the player’s right of appeal as provided in paragraph 8. And the player was obligated by the agreement to accept the salary rate thus fixed and play for the petitioner or its assignee, or to refrain from playing during said year. Thus, the contract might be renewed by petitioner, or its assignee, from year to year throughout the professional life of the player. That this right was regarded by the parties as very valuable, is not only evidenced by the wording of paragraph 7 of the contract, but is established by other facts and circumstances in the record before us. The contracts in question covered only the playing season of 1922, yet we find that petitioner purchased the contract of Player Sealy on September 11, 1922, for $490, and the contract of Player Hamilton on September 12,1922, for $1,000, when the playing season for that year was then rapidly approaching its end. Also, on December 18, 1922, after the close of the playing season for that year, petitioner purchased the contract of Player Jack Adams for $2,500. These facts justify the conclusion that petitioner purchased said contracts, solely *1041because it thereby acquired the right to renew them for the succeeding year at any time prior to March 1, 1923.
Having concluded that the amounts paid for the contracts represent capital expenditures, can it be said that these contracts were exhausted by the lapse of time? Each contract covered only the playing season the year in which or for which it was made, but was according to its terms renewable by the club or its assignee for the succeeding year. By virtue of the renewal provisions, the rights acquired under each contract extended beyond the year when the contracts were acquired. The ultimate result would have been the same if a single contract had been made with each player for an indefinite or undetermined period, subject to an annual salary adjustment under the conditions stated. While under certain facts and conditions contracts for an indefinite period may in fact become exhausted over a reasonably ascertained or estimated period of time, no evidence has been introduced in this case from which it can be ascertained when the contracts will become exhausted for the purpose of determining the allowance with respect thereto. The determination of the respondent must, therefore, be approved.
Reviewed by the Board.
Judgment will be entered for the respondent.