Frieda Bernstein, Petitioner, v. Commissioner of Internal Revenue, Respondent, and Three Other Consolidated Cases, 230 F.2d 603 (2d Cir. 1956)

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U.S. Court of Appeals for the Second Circuit - 230 F.2d 603 (2d Cir. 1956) Argued February 17, 1956
Decided March 5, 1956

Robert Ash, Washington, D. C. (Charles H. Berg, Brooklyn, N. Y., on the brief), for petitioners.

Frank E. A. Sander, Atty., Dept. of Justice, Washington, D. C. (H. Brian Holland, Asst. Atty. Gen., and Lee A. Jackson, Atty., Dept. of Justice, Washington, D. C., on the brief), for respondent.

Before CLARK, Chief Judge, and FRANK and HINCKS, Circuit Judges.


The taxpayers here seek to avoid the deficiencies assessed against them for 1946 and 1947 income taxes by showing error in the disallowance of depreciation and amortization deductions claimed by them. They bought land in New York City subject to a long-term lease, upon which was a commercial office building erected by the tenant before their purchase. They seek deduction of the claimed value of this building prorated over the remaining term of the lease, and they also seek amortization of what they claim is the "premium" value of this favorable lease. But as the Tax Court found, 22 T.C. 1146, they offered no proof to sustain their claims as being at all realities. See C. I. R. v. Moore, 9 Cir., 207 F.2d 265, certiorari denied 347 U.S. 942, 74 S. Ct. 637, 98 L. Ed. 1091. The purchase price they paid was $428,579.88, and the tax assessment figures upon which they relied indicated a value of $500,000 for the land and $900,000 for the building. A natural conclusion might well be that the cost of the building was already eliminated from the price. At any rate, there was no showing that the useful life of the building would be longer than the term of the lease, or that there were favorable office rents to show a real premium over rental value, or in short that there was anything in the nature of wasting assets to be written off. The recent case of Millinery Center Bldg. Corp. v. C. I. R., 2 Cir., 221 F.2d 322, certiorari granted 350 U.S. 820, 76 S. Ct. 79, relied on by the taxpayers, involved substantially different facts and a quite different measure of proof.