1928 BTA LEXIS 3086">*3086 Petitioner paid certain amounts to secure immediate possession of leased premises. Held, that the evidence is not sufficient to overcome the presumption that Commissioner's determination is correct.
13 B.T.A. 1266">*1266 The respondent asserts a deficiency in income and profits tax for the year 1920 in the approximate amount of $2,700. The only issue is whether the amount of $3,300, paid by the petitioner to secure immediate possession of certain leased premises, is an ordinary and necessary business expense or a capital expenditure.
13 B.T.A. 1266">*1267 FINDINGS OF FACT.
The petitioner is a Minnesota corporation with its principal office at Minneapolis.
The following allegation of the petitioner is admitted in the answer of the respondent:
The taxpayer prior to January 1-1920 arranged for and did enter into a lease covering certain space on the second floor 50 X 113 feet and 20 feet of the ground floor for entrance, stairway and display space for store purposes, the premises known as 12th and Walnut, Kansas City, Missouri. The elase covers the period January1928 BTA LEXIS 3086">*3087 1-1920 to October 30-1930.
Lessee - Rossman, Incorporated
Lessor - M. Samuels & Co., Baltimore, Md.
The negotiations were conducted with Albert Schoenberg & Co., realtors, Kansas City, Mo. During all of the negotiations with the agent it was discussed with and understood by the agent the importance of an adequate entrance to the second floor in relation to second floor merchandising. At this time the 20 feet of ground space was occupied under leases by Gorkons, Bernat & Dorsey. Their leases each covering a part of the said 20 foot space. The agent assured the taxpayer that the second floor space would be at their disposal January 1-1920 and the 20 foot ground floor space would be at their disposal March 1-1920. Depending upon this assurance the taxpayer arranged for merchandise for the store and January 1-1920 began to remodel and prepare the second floor space. After the remodeling was in progress and the merchandise had been purchased it became known to the taxpayer that the Gorkons, Bernat & Dorsey leases did not expire until November 1-1920. Negotiations were then entered into with Gorkons, Bernat & Dorsey to obtain this space, and the said space was obtained August1928 BTA LEXIS 3086">*3088 1-1920 for the following considerations:
| Gorkons | $400.00 |
| Bernat | 400.00 |
| Dorsey | 2,500.00 |
| Total | 3,300.00 |
OPINION.
LANSDON: The petition was filed without a copy of the deficiency letter or of the statement upon which the Commissioner asserted the deficiency. It is obvious, however, from the record that the petitioner seeks the deduction of the amount of $3,300 from its gross income for the taxable year as an ordinary and necessary business expense and that the Commissioner disallows such deduction and holds that the amount in question was a capital expenditure and is amortizable ratably over the terms of the lease.
The petitioner cites our decision in the proceeding of in support of its contention. In that case the petitioner sought to include an amount paid in circumstances somewhat similar to the facts herein in its invested capital, such amount having been in the first instance charged to expense. The 13 B.T.A. 1266">*1268 deficiency in controversy was based, in part, on the Commissioner's exclusion of such amount from the petitioner's invested capital. While the headnote in that case seems to support the contention1928 BTA LEXIS 3086">*3089 of the petitioner, an examination of the decision discloses that we said:
Since all the facts necessary to a disposition of this question in accordance with the foregoing principles have not been made known to us by proper evidence, we are unable to determine to what extent, if any, the taxpayer is entitled to include the amount in question in invested capital; hence we are forced to sustain the Commissioner's action in disallowing the whole amount as invested capital.
It is obvious from the above that in our decision in the Mandel Brothers case, supra, we went no further than to hold that the evidence adduced was insufficient to overcome the presumption that the determination of the Commissioner was correct. On this point our decision was based on lack of evidence and establishes no rule for the determination of the issue here.
The petitioner contends that the amounts paid resulted in no benefit to it, except that possession of the premises was acquired three months earlier than otherwise would have been possible. There is no evidence, however, as to whether the amounts in question were paid by the lessor or the lessee. If paid by the lessee in the circumstances1928 BTA LEXIS 3086">*3090 herein it would seem p0ssible that action to recover from the lessor could be maintained. It is also significant that the lease is not in evidence. It is obvious, therefore, that there is not sufficient evidence to overcome the presumption that the determination of the Commissioner is correct.
Decision will be entered under Rule 50.