Fontius Shoe Co., Petitioner, v. Commissioner of Internal Revenue, Respondent

Fontius Shoe Co., Petitioner, v. Commissioner of Internal Revenue, Respondent. Docket No. 9944. Promulgated August 22, 1927. Depreciation on furniture and fixtures based on unexpired term of lease allowed. Arthur H. Laws, Esq., and Richard M. Oreme, O. P. A., for the petitioner. A. G. Bouchard, Esq., for the respondent. This is an appeal from the determination by the respondent of a deficiency of $1,819.36 in income and profits taxes for the fiscal year ended February 28, 1919. The petitioner alleges that the depreciation allowed by the respondent is insufficient. The petitioner also alleges that the respondent erred in reducing its invested capital for the taxable year, and the respondent admits error in this particular. FINDINGS OF FACT. The petitioner is, and during the taxable year was, a Colorado corporation with the principal offices in Denver, Colo. The petitioner is and during the taxable year was engaged in the retail shoe business. During the taxable year the petitioner occupied a store room under a ten-year lease entered into November 14,1913, for a term beginning January 1,1914, and ending December 31,1923. The lease contained no right of renewal. About seven years prior to the expiration of the term of said lease, the petitioner sought to arrange for an extension thereof and was advised that the lease could not be renewed. At that time the premises occupied by the petitioner had been leased by the owners to a third party for a term to begin at the expiration of petitioner’s lease. About two months before the termination of its lease, the petitioner vacated the premises, which have since been occupied by the new lessee, and the petitioner moved into another store room. The furniture and fixtures of the petitioner during the taxable year consisted of shelving, balconies, linoleum, settees and mirrors. The mirrors were attached to large pillars in the building and had been cracked and damaged during the term of the lease. None of the furniture or fixtures could be used by petitioner after moving to its new store room, except some of the shelving, which have been used in its basement department. The petitioner has been unable to sell any of the old furniture and fixtures, although it has offered them for sale for several years. The admitted depreciated cost of the furniture and fixtures as at March 1, 1918, -the beginning of the taxable year, was $19,037.55. The value of the furniture and fixture as at the termination of its lease was $100. The unexpired term of the lease was five years and ten months. The petitioner knew at, and before, the beginning of the taxable year that its lease would not be renewed. [MAJORITY — Van Fossan:] OPINION. Van Fossan: Petitioner is entitled to an allowance for depreciation based on the depreciated cost of furniture and fixtures above found, less salvage value, and prorated over the remaining term of the lease. See Appeal of H. Citrin, 2 B. T. A. 626; Appeal of Kunkel & Co., 3 B. T. A. 133. Judgment will be entered on IS days’ notice, under Buie SO. Considered by Maiíqtjltte, Milliken, and Phillips.