In 1915, defendant leased a tract of land to X for ninety-nine years. The lease provided that the lessee could remove the old building and replace it; and that on termination, the lessee should surrender the land, buildings and improvements. In 1929, the lessee razed the old structure and erected a new one. On default by the lessee in 1933, the lease was cancelled and defendant repossessed the premises. The commissioner of internal revenue determined that the difference between the fair market value of the new building in 1933 and the unamortized cost of the building razed in 1929 was taxable to defendant as net gain for 1933. The board of tax appeals overruled the contention of the commissioner, and the circuit court of appeals affirmed. Held, reversed. As it was not shown what type of building was erected, nor whether the difference in value so found accurately reflected the increase in the land and building as a single estate, the· presumption of correctness of the commissioner's determination was not overcome. Even assuming that the difference did reflect that increase, defendant still realized a taxable gain in 1933. Helvering v. Bruun, (U.S. 1940) 60 S. Ct. 631.
Benjamin W. Franklin,
TAXATION - INCOME TAX - IMPROVEMENTS MADE BY LESSEE AS INCOME TO LESSOR,
Mich. L. Rev.
Available at: https://repository.law.umich.edu/mlr/vol38/iss8/31