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Interestingly, the dissent either would have spread the amortization over the term of the new lease or would have allowed the lump deduction as an ordinary and necessary business expense. Finding the record to be insufficient, however, the dissent was unable to decide which of these two courses was correct. The distinction between Henry B. Miller and the case now under consideration is obvious.

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Miller, taxpayer's capital investment brought him a return of income, through use of the physical asset, which return of income was increased over the period of the old lease. In the instant case, on the other hand, taxpayer not only did not use the physical asset, it intended to and almost immediately did destroy the buildings. Trustee Corporation v. Commissioner, supra, is on all fours with Henry B. Miller and is similarly distinguishable. Taxpayer in that case purchased property in fee simple subject to an outstanding leasehold interest.

An amount was subsequently paid to the existing lessee for the cancellation of the lease in order to allow the owner to execute a more favorable lease agreement. The Commissioner argued that the cost of cancelling the leasehold interest should have been amortized over the life of the new lease, but the tax court once again held, over a dissent, that the cost was amortizable over the remaining life of the old lease.

Again, however, taxpayer there continued to use the physical asset. In Harriet B. Borland, supra, the same result was reached when the owners of leased property expended sums for the cancellation of existing leases in order to lease the premises on different terms, and Laurene W. Berger, supra, applies the same approach. In none of these four cases, however, was the physical asset that was freed from the "encumbrance" of the existing lease acquired with the intent that it would immediately be demolished.

In the instant case, the leaseholds were not cancelled in order that taxpayer might use the buildings in its business or for the production of income; rather, the leases were cancelled in order that taxpayer might demolish the buildings. Amortization requires a using up or "wasting" of an income-producing or business-related asset over an ascertainable period, and taxpayer cannot argue that the asset i. There being no controlling or convincingly persuasive authority that would justify taxpayer's amortizing the lease cancellation costs over the unexpired terms of the leases on these facts, we reject taxpayer's argument and turn now to a consideration of the government's argument that taxpayer should not be allowed to amortize or deduct these costs at all.

The government raises three different arguments to support its conclusion that the cost of acquiring these leasehold interests is not amortizable and instead should be added to taxpayer's basis in the land, which is a non-amortizable asset. We are not persuaded that any of these theories is correct. Correctly stating that the cost of acquiring a capital asset is added to the taxpayer's basis in that asset, e. Commissioner, , U. United States, 6 Cir.

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We cannot agree. In that circumstance, Treas.


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Such basis shall be increased by the net cost of demolition or decreased by the net proceeds from demolition. We are not here concerned with the tax treatment of demolition costs; rather, we are concerned only with the tax treatment of costs incurred to remove intervening leases in order that the owner of the underlying fee interest might tear down the existing structures and erect a new building. Furthermore, there is no showing here that taxpayer purchased the fee interests with an intention of demolishing the existing structures, and even if we assume from the proximity in time of several of the transactions that taxpayer did have that intent as to three of the buildings, no such showing was made as to the fourth.

In that regard, this case is more closely analogous to Keiler v. United States, W. In that case, taxpayers did not have an intention to demolish the existing structures at the time they purchased the underlying fee interest, but they did have such an intention at the time they acquired intervening leasehold interests in order to make way for a new building.

In the Keiler case, the costs of acquiring the intervening leasehold interests were added to the basis of the new building. We have been cited no cases applying the government's analogy, and we see no persuasive reason why we should extend Treas. Three of the fee interests were purchased the same day that the leasehold interests were acquired, but the fourth fee interest had been purchased over a year earlier. The trial court's finding of fact on this point is only that "At the time of the acquisition of such leasehold interests, [taxpayer] intended to demolish the [buildings].

Under this approach, the government would have us hold that a taxpayer should not receive favorable tax treatment solely because he accomplishes in two steps what he would otherwise achieve in a one-step operation. In other words, because the outright purchase of a fee interest with its concomitant right to immediate possession would afford the purchaser no amortization deduction — the entire price being attributable to the land, which is not depreciable — taxpayer should not receive an amortization deduction merely because he purchased the fee interest in one transaction and then purchased the right to immediate possession in a second transaction.

This argument would carry more weight had the government alleged that taxpayer had manipulated the purchasing arrangements in order to avoid taxes, or if it had been shown that taxpayer could have accomplished its purposes with one outright transaction, or perhaps even if the sellers of the fee interests were identical to the sellers of the leasehold interests. See Thalhimer Brothers, Inc. Commissioner, , 27 T. See also Herzberg v. Alexander, W. None of those circumstances are before us, and the record being devoid of any indication that tax avoidance motivated taxpayer's entry into these transactions, we hold only that the government may not, on this record, assign the cost of acquiring the leasehold interests to the cost of the land taxpayer already owned.

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Our listing of these few examples of circumstances in which different factors might be relevant should not be considered as indicating that our holding would necessarily be different in those cases or as indicating that there are no other circumstances under which the government might prevail on this theory.

As in Third National Bank in Nashville v. During the trial of this case, both parties raised the identical alternative argument, that the cost of acquiring the leasehold interests should be added to taxpayer's basis in the new building and thus be amortized over the anticipated useful life of that building. In choosing this middle course, the learned trial judge cited two cases, the conclusions and reasoning of which he specifically adopted: Keiler v.

We agree that those two cases reflect a sounder approach than that urged in the primary arguments of the litigants, and we affirm the trial court's decision on this point. The new building was found to have a useful life of 45 years. Keiler v. United States, supra, involved stipulated facts. Taxpayer there had no intention of demolishing the existing improvements when the fee interest was acquired, but taxpayer did have an intent to demolish the buildings when the intervening leaseholds were acquired.

In allowing taxpayer to amortize the cost of obtaining the leasehold interest, the district court adopted the reasoning of Business Real Estate Trust of Boston v. Commissioner, , 25 B. Looking to Business Real Estate Trust of Boston, we find that it strongly supports taxpayer's position here. In that case, the owner of certain real property was desirous of expanding his land holdings, tearing down existing improvements, and erecting a new structure for income-producing, business purposes.

With that intent clearly present, taxpayer acquired the desired additional fee interests. In order to begin construction of the new building, however, taxpayer had to obtain the cancellation of intervening leases on both the old and the newly acquired land. The parties argued positions in many ways identical to those before us in the instant case, but the court there allowed taxpayer to amortize the leasehold acquisition costs over the life of the new building:. The government sought to require amortization of the cost of acquiring the leasehold interests over the unexpired terms of the existing leases, taking this position because "the expiration dates of these leases have long since passed, [and therefore] no allowance would be permitted during the taxable years" involved.

The government also raised an argument under the predecessor of Treas. Taxpayer argued that the expenditure should be spread over the term of the new lease on the new premises. In addition, the argument that the leasehold acquisition costs should be added to taxpayer's basis in the land was also considered.

See 25 B. Nor were the benefits of the expenditures to inure permanently, or in the cases of the [new] leases over their term. The payments were made to the tenants to obtain immediate possession so that the new building might be erected. It is the building that is to produce the income and it seems to us both just and reasonable that these expenditures should be added to the building cost and recovered over its life. Third National Bank in Nashville v. United States, supra, applies the same reasoning, although the taxpayer there was the owner of a long term lease rather than the owner of the fee interest.

See also Commonwealth Natural Gas Corp. United States, N. Ohio , F. These cases apply the better rule, which is more logical and more equitable than those urged by the opposing parties. What taxpayer really acquired by his expenditures here was not land, as urged by the government, nor did it acquire an existing leasehold for its own use, as urged by taxpayer. Rather, as the able district judge recognized, these expenditures gave taxpayer the use of land that it already owned for the unchallenged purpose of erecting a new building.

The costs are most closely related to the construction of the new building and must therefore be added to taxpayer's basis in that new building. Accordingly, the costs of cancelling the existing leases must be amortized over the useful life of the new building, and the district court's holding on this issue will also be affirmed.

The first major issue raised by this appeal involved a dispute over both the law and the facts, and the second issue was primarily centered around differing views of the governing law. The parties are in basic agreement regarding the law that controls this third and final issue, but they are in sharp disagreement concerning the facts. The issue was submitted to the jury, which found against taxpayer, and this appeal followed.

Branding | Edward Isamu Nicholas

On April 13, , taxpayer purchased a tract of land adjoining its existing building, together with the improvements thereon, including a building known as the Bering-Cortes Building. Following the purchase, taxpayer employed a consulting engineer to conduct a detailed examination of the Bering-Cortes Building.

The consulting engineer completed his study and submitted an engineering report to taxpayer in November, Taxpayer's board of directors met on January 28, , and, after referring to the report, resolved that use of the building was not feasible and that the building should be abandoned. As a result of this action, the building was never used in taxpayer's business. During the period from September 21, , through October 4, , taxpayer acquired the remaining buildings located in the block surrounding the Bering-Cortes Building.

The entire block was razed between July 11 and November 8, , and taxpayer subsequently erected a new building to house its facilities. The parties agree that this is the correct figure if taxpayer is entitled to a loss deduction, but in connection with an audit of taxpayer's income tax return, the Commissioner disallowed the entire deduction. Taxpayer paid the additional taxes and interest assessed and then filed its claim for a refund. The instant suit was commenced upon the Commissioner's failure to act on this claim within six months of its filing. See 28 U. Section a of the Internal Revenue Code of allows a taxpayer to deduct any loss sustained during a taxable year that is not compensated for by insurance or otherwise.

See United States v. Ivey, 5 Cir. The government agrees that taxpayer's view of the applicable law is correct, and the amount taxpayer will be entitled to deduct if it qualifies under Treas. The only question on this issue is whether taxpayer decided to abandon and demolish the Bering-Cortes Building before or after the date of purchase. The loss must be taken in the year in which it is "sustained," but the parties agree that is the proper year for claiming the deduction, if a deduction is allowable, because that is the year in which taxpayer "abandoned" the building.

See Hummel v. Commissioner, , 19 T. Taxpayer argues that it intended at the time of purchase to use the Bering-Cortes Building in its business. Admitting that it bore the burden of proof on the intent issue, taxpayer put a series of witnesses on the stand, including its president at the time of the transactions, its current president, and its treasurer. All of these witnesses testified that taxpayer intended to use the building and that they were unaware of the conditions that later precluded using the building.

In this regard, testimony was given to the effect that it was impossible to conduct a thorough on-site inspection of the Bering-Cortes Building while it was still occupied and that the building's construction plans and specifications were misleading and inaccurate. Admitting that it invested a substantial sum in purchasing the building "like a pig in a poke," taxpayer nevertheless has consistently maintained that its real purpose was to obtain the building for use in its business.

Taxpayer insists, for example, that the engineering report concluding that the building was unsuitable for taxpayer's purposes "came as a great surprise and shock to the management of the company. The government was unable to produce any direct evidence to controvert taxpayer's version of when the intent to abandon the building was formed.

Instead, the government elicited testimony on cross-examination of taxpayer's president that the newspaper's production manager had looked the building over and had rendered an informal opinion regarding it. In addition, however, the government relied on a series of inferences to rebut taxpayer's version of the case:. Taxpayer contended that it desired to use the basement of the Bering-Cortes Building to house its printing presses. The Bering-Cortes Building's dimensions were approximately 75 feet by feet.

The facilities for the printing room in taxpayer's new building occupy an area approximately feet by feet. At the close of the evidence, taxpayer filed a motion for a directed verdict in its favor. Determining that a factual question regarding taxpayer's intent at the time of purchase had been raised, the trial judge denied the motion and submitted the case to the jury. One of the special issues that the judge decided to submit to the jury asked:. Taxpayer objected to the submission of the issue in this form and asked for an instruction that would ask the jury whether taxpayer intended, at the time it acquired the Bering-Cortes Building, to abandon or demolish it.

In addition, taxpayer requested an instruction that would advise the jury that "intent" means " dominant intent or the intent which taxpayer had under the circumstances as they exist at the time or which are foreseen as more probable than not. These motions were refused and judgment was entered for the government on this issue. Taxpayer appeals from the entry of that judgment and assigns the following as error:. The failure of the trial judge to grant taxpayer's motions for directed verdict and for judgment notwithstanding the verdict;.

The failure of the trial judge to grant taxpayer's motion for a new trial;. The failure of the trial judge to instruct the jury that taxpayer must have had a dominant intent to abandon and demolish the building if the issue was to be decided against it.

The short answer is that such motions should be denied. Testing the instant motions against the Boeing Co. Shipman standards, we find that the trial court properly denied the motions and submitted the case to the jury. This is not a case in which the jury was left to decide the issues only on a consideration of whether it believed or disbelieved taxpayer's evidence. To the contrary, the government not only cited the possible pre-purchase inspection, it affirmatively relied upon a series of inferences based on the evidence adduced at trial.

The first inference cited by the government was a call to the jurors to rely on their common sense to conclude that most businesses do not spend over a quarter of a million dollars without knowing what they are really buying. Were that the only "proof" the government could offer, this might be a difficult case, but there were additional factors the jury could consider. The government's second and third inferences were based, respectively, upon the time period between the date of acquisition of the building and its abandonment and upon the actual unsuitability of the building for taxpayer's purposes.

The Regulations specifically provide that such inferences are allowable:. The answer to the question does not depend solely upon the statements of the taxpayer at the time he acquired the property or demolished the buildings, but such statements, if made, are relevant and will be considered. Certain other relevant facts and circumstances that exist in some cases and the inferences that might reasonably be drawn from them are described in subparagraphs 2 and 3 of this paragraph.

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The question as to the taxpayer's intention is not answered by any inference that is drawn from any one fact or circumstance but can be answered only by a consideration of all relevant facts and circumstances and the reasonable inferences to be drawn therefrom. We agree that the convergence of these allowable factors with taxpayer's direct testimony and the government's cross-examination of taxpayer's witnesses fairly raised a factual question: What was taxpayer's intent at the time it acquired the Bering-Cortes Building?

Although the government's evidence was not direct, we hold that it did produce "substantial evidence" in opposition to taxpayer's version and that this evidence was sufficient to prevent displacement of the jury by taxpayer's motions. Taxpayer next contends that the jury's verdict was so contrary to the great weight and preponderance of the evidence that the motion for new trial should have been granted. Great discretion is vested in the district courts to determine whether to grant or deny a motion for new trial, and the general rule on appeal is that the trial court's ruling is not reviewable absent a clear abuse of discretion.

Bucon Construction Co. Taxpayer's motion for new trial relied upon the alleged failure of the government to produce evidence to controvert taxpayer's version of when it formed the intent to abandon and demolish the building. The verdict was supported by the challenged suggestion that taxpayer did in fact inspect the building in some manner before purchasing it, by the reasonable inferences to be drawn from the period of time between purchase and abandonment, and by the reasonable inferences to be drawn from the fact that taxpayer purchased a building that was in fact unsuitable for its purposes.

Under these circumstances, we are unprepared to say that there was any abuse of discretion in the trial judge's allowing the verdict to stand. The period here in question was slightly more than nine months. Similar time periods have been held to be probative of intent in other cases. Heiner, 3 Cir. United States, D. Generes, , U. Donruss Co. Here, however, under the totality of all the instructions delivered to the jury, the issue was clearly put to the jurors as follows:.

Taxpayer's argument might be valid — although that question is not now before us — had the question been framed as follows:. Under the latter inquiry, taxpayer might have been entitled to an instruction advising the jury to find for taxpayer if it concluded that taxpayer primarily intended to use the building in its business but also had a concurrent non-dominant intent to abandon the building if certain circumstances should develop.

That was not the special issue submitted, however, and the jury found that taxpayer had no intent to use the building for business purposes — that is answer enough to taxpayer's argument. We may safely assume that jurors have common sense, and in this case we are satisfied the overall charge to the jury advised them of the proper issue for their determination.

Precise use of talismanic words may be desirable in submitting special issues to a jury, but so long as the charge fairly advises persons of common intelligence what the real factual issue is, we will not cast error upon a trial judge for having chosen words different from those the litigants desire.

Although this troika of problems was not easy to manage, it was driven to a correct haven of decision, and the trial court is affirmed in its resolution of each of the triad of issues. You'll also want to have cash to buy more sample cards if eight tastes just won't cut it for you. Because there will be a lot of beer here, we recommend you take the shuttle from Lucky's Pub in the Heights.

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Houston Fire Museum, Milam Street, The Romanian-born artist has created an environment that feels both techno and surreal, with a dash of Kafka. It's reminiscent of an Eastern European disco — in a good way. Andea crafted giant spiders and shell- or cocoon-like shapes in white hydrocal, lit from within by a harsh reddish-orange light. The jointed, motorized spider legs move slowly and ominously. Short, slender, glowing rods of cold cathode fluorescent light in green and blue hang all over the room, with wires forming a tangled kind of web.

The lights alter the colors in the room, turning it from, say, orange into the color of past-the-date beef. Small, square LED case fans used to cool computers are suspended in the space, spinning and humming, shaking slightly with their effort. It's an incredibly strange and highly original environment, and the seemingly disparate elements work together to create something otherworldly. Lawndale Art Center , Main, Top arts Stories. Features Isn't Ballet Great? By Mandy Oaklander. Email to Friend. Most Popular Stories.


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Seth Alverson painted exact duplicates of his unsold artworks and hung them side by side to sell as sets. Is this an exercise in futility, an act of genius or both? Double Jeopardy 1 Seth Alverson painted exact duplicates of his unsold artworks and hung them side by side to sell as sets.