*865 These proceedings were brought to redetermine the deficiencies in income taxes of Dwight Howard and Evalena M. Howard for the year 1922 in the sums of $365.32 and $735.22, respectively. Dwight Howard also alleges an overpayment of $200.89. Evalena Howard admits a deficiency of $133.08, leaving a remainder of $602.14 in controversy in her case. The same issues are involved in both cases and hence they were consolidated for hearing.
The petitioners allege that the respondent erred in:
(1) Refusing to allow as a deductible expense the sum of $9,800, of which the sum of $9,300 was expended by the petitioners as a broker's commission for services in procuring for them a 99-year lease on real estate owned by them, and $500 for legal services incident thereto.
(2) Charging the sum of $3,000 as expended in permanent improvements on the premises covered by the said lease, instead of $1,000 admittedly so chargeable.
FINDINGS OF FACT.
On January 1, 1922, the petitioners owned a 99-year leasehold estate, renewable forever, in a lot of land known*2317 as Nos. 65, 67, and 69 East Gay Street in the city of Columbus, Ohio, and having a three-story brick building thereon. By lease dated January 1, 1922, and executed March 11, 1922, the petitioners "granted, demised and leased" to the Middle States Securities Co., an Ohio corporation, the said real estate for a term of 99 years, renewable forever thereafter at election of lessee in subsequent terms of 99 years each, for a yearly rental of $14,500, payable quarterly in advance. The lease was made subject to several short-term leases thereon including a lease to the John F. Rees Co. terminating October 31, 1931. The lease contained various other covenants and agreements not pertinent to this proceeding.
The petitioners paid the sum of $9,300 to the firm of Ross & Case, realtors, for its services as brokers in negotiating the said lease and the sum of $500 as legal expense incident to this transaction.
Prior to the execution of the lease to the Middle States Securities Co. the petitioners advanced to the John F. Rees Co. the sum of *866 $3,000 as a so-called bonus to induce that company to enter into a short-term lease expiring October 31, 1931. The $3,000 was to be expended*2318 as the company saw fit in remodeling the building to suit its particular needs. No itemization or segregation of the amounts so expended was presented by the petitioners, but it was estimated that approximately two-thirds of the amount expended was used for alterations, fixtures and equipment peculiarly adapted to the needs of the tenant and that the remaining one-third was expended for permanent improvements. The John F. Rees Co. occupied the premises for three years, abandoning the lease at the end of that period. The respondent capitalized the expenditure of $3,000 and allowed the petitioner to deduct $1,000 each year.
OPINION.
VAN FOSSAN: In this case a division decision was promulgated November 30, 1929. On December 3, 1929, by order of the Chairman, the report was referred to the full Board. The basis of this action was a suggested inconsistency between the announced conclusion of law and that of the Board in .
Since the Bonwit Teller & Co. case was promulgated, the Board has promulgated, on April 25, 1930, the report in *2319 . In that case we held that a commission paid by the lessor for the procuring of a 99-year lease, renewable forever, on property in Ohio was a capital expenditure to be ratably deducted as the lease was exhausted. That conclusion was based on facts in all ways comparable in the instant case and is controlling here. The action of the respondent was correct.
Turning to the second allegation of error, we are met by a lack of satisfactory evidence. The sum of $3,000 paid by the lessors to the John F. Rees Co., although termed a "bonus" was in reality the amount required to place the leased building in the condition suitable and proper for the needs of the tenant. This sum was admittedly expended for various purposes, but the amounts and character of the various items were not shown. Some were for repairs, while others were for the construction or modification of essentially permanent improvements. The evidence before us does not prove that the respondent's determination was erroneous. Therefore, the action of the respondent is approved.
This report supersedes the report promulgated November 30, 1929.
Reviewed by the Board.
*2320 Judgment will be entered under Rule 50.