Park & 46th Street Corp. v. Commissioner

Park and 46th Street Corporation, Petitioner, v. Commissioner of Internal Revenue, Respondent Park & 46th Street Corp. v. Commissioner Docket No. 21121 United States Tax Court 14 T.C. 588; 1950 U.S. Tax Ct. LEXIS 228; April 14, 1950, Promulgated *228 Decision will be entered for the respondent. Excess Profits Tax -- Relief Under Section 722 -- 722 (b) (5). -- The petitioner has not established its right to relief under section 722 (b) (5) by showing that deductions for depreciation of the cost of assets having lives coextensive with a lease were larger in the base period than in the tax years because the term of the lease was extended in 1941, thus reducing the rate. Maurice Dekoven, Esq., for the petitioner. Thomas R. Wickersham, Esq., and Aaron Resnik, Esq., for the respondent. Murdock, Judge. MURDOCK *588 OPINION. The Commissioner denied the petitioner's applications for relief under section 722 for 1942, 1943, and 1944. The petitioner claims that it is entitled to relief under section 722 (b) (5). The facts have been stipulated. The petitioner is a *229 New York Corporation, organized in 1923. It operates an office building at 250 Park Avenue, New York City. The building, completed on or about May 1, 1925, was erected by the petitioner under a ground lease, on land owned by another. The original term of the ground lease ran to March 31, 1944, but in 1935 it was extended to October 1, 1947. The lease contained an option under which it could be renewed by the petitioner and that option was exercised by the petitioner in 1941, further extending the life of the lease to March 31, 1965. The deductions for amortization or depreciation of those assets, the useful lives of which depended upon the term of the lease, were substantially larger in the base period years than they were in the tax years because the rate of amortization and depreciation was reduced to reflect the longer period of the lease after the lease was extended in 1941 by the exercise of the option. *589 The petitioner contends that the portion of its income for the taxable years which is equal to the excess of the amortization and depreciation deductions for the base years over those for the tax years should not be subjected to excess profits tax because it arises*230 "merely from technical accounting requirements and not from any accession of any true economic wealth" or increase in income due to the war. This case is not distinguishable in principle from the case of Clinton Carpet Co., 14 T. C. 581, decided this day, and following that case, the petitioner's claim for relief is denied. See also Philadelphia, Germantown & Norristown Railroad Co., 6 T. C. 789. Decision will be entered for the respondent.