Estate of Barker v. COMMISSIONER OF INTERNAL REVENUE
| Decision Date | 26 September 1928 |
| Docket Number | Docket No. 8728. |
| Parties | EXECUTORS OF THE ESTATE OF GEORGE E. BARKER, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Board of Tax Appeals |
C. J. Baird, Esq., for the petitioners.
L. A. Luce, Esq., for the respondent.
Respondent has determined deficiencies in income tax as to George E. Barker for the years 1919, 1920, and 1921 in the respective amounts of $5,221.92, $811.21, and $2,341.83. Only parts of the deficiencies are in controversy. The errors assigned by petitioners are: (1) That the respondent did not make a legal determination of the deficiencies for the years 1919 and 1920, in that the provisions of section 1309 of the Revenue Act of 1921 were not complied with; (2) that the respondent erroneously included as income an amount received as security for the performance of a 99-year lease; and (3) that the respondent erred by disallowing deductions of 20 per cent of the cost of certain alterations made for the benefit of a tenant under a 5-year lease.
At the hearing petitioners expressly abandoned the last assignment of error.
George E. Barker died on November 27, 1927, after the date of the filing of the appeal and prior to the date of hearing.
FINDINGS OF FACT.
George E. Barker, prior to his death on November 27, 1927, resided in Omaha, Nebr. On December 30, 1919, George E. Barker leased to Joseph L. Wolf and Samuel N. Wolf certain property known as the Karbach Block, situated in Omaha, Nebr., for a term of 99 years, beginning January 1, 1920, and ending December 31, 2018. Annual rental in the amount of $22,500 was payable quarterly, and provision was made in the lease for the deposit of $50,000 as security for the performance by the lessees. Payment of said amount was made, $25,000 at the commencement of the lease, and $5,000 per year for each of the succeeding five years. The material provisions of the lease follow:
5. Lessees agree to pay or cause to be paid and fully discharged, before the same become delinquent, all taxes, assessments, charges, duties, payments, rates and liens, of every nature, name or kind whatsoever * * *
7. It is understood that lessor shall pay and discharge all liens now on said demised premises, including the existing mortgage, as the same becomes due and payable.
8. Lessees agree, at all times to keep the buildings now on said demised premises and those which may hereafter be erected insured against loss by fire in an amount not less than $100,000.00 or, if $100,000.00 fire insurance is not obtainable, in an amount not less than the full insurable value of all buildings and against loss by tornado in an amount not less than $25,000.00 and to maintain compensation, elevator and public liability insurance in an amount not less than $10,000.00 and $20,000.00 limits in company or companies acceptable to lessor, and to deliver all policies without delay to lessor. All policies shall be written to cover the interests of lessor as the principal insured, and, when the interest of lessor is mortgaged, shall have a proper mortgage clause. In case lessees fail to provide such insurance lessor may take the steps and advance the money required to do so and lessees agree to pay same to lessor on or before the next rent day.
10. In every case of destruction, complete or partial, without fault of lessees, of buildings now on said premises or hereafter to be erected, lessees shall not be obliged to expend more for reconstruction or rebuilding than the moneys realized from insurance; but, in no case, shall destruction, complete or partial, or damage terminate or suspend this lease or vary any of the obligations of lessees herein assumed.
15. Every assignment or attempted assignment of lessees' interest or any part thereof, by operation of law (meaning by judgment, decree, execution, attachment, bankruptcy, voluntary assignment for the benefit of creditors or other process of law excepting foreclosure of permitted mortgages) and every assignment of part or parts of lessees interest, by gift or contract, shall be null and void and, at the option of lessor, terminate all interests of lessees, unless said assignment is consented to by lessor in writing.
18. When an assignment is made as herein permitted and only in such case lessees shall be released from further liability hereunder, but lessor shall not be obliged, in any case, to return money or release security or securities of any kind.
20. If said demised premises or any part thereof is hereafter condemned under the law of eminent domain, all the awards, to whomever made, up to $500,000.00, shall be paid to and belong to lessor. In case less than all of said premises is taken under the law of eminent domain, the rental installments which lessees shall pay lessor thereafter for the part not taken shall be such proportion of the rental installments herein fixed as will be determined by at least two members of a board of three arbitrators, of whom one is to be chosen by lessor, one by lessees and the third by said two members. If all of the demised premises are taken under the law of eminent domain, this lease shall be terminated and lessees shall be entitled to a return of such balance, if any, of the security, $50,000.00 hereinafter described, as they shall then be entitled to.
24. All losses, costs and expenses of every nature and kind, in court or elsewhere, whether the suits or claims are well founded or not, including attorneys fees, which lessor shall incur in enforcing, maintaining, preserving or defending lessor's rights under this contract or which may arise or grow out of or on account of or in connection with this contract, in any manner, lessees agree to pay to lessor, in each case, with interest at the rate of 7% per annum from date of payment by lessor on the next quarterly rent day after lessor will have incurred the same or sooner, the intention being that lessees shall hold and keep lessor harmless from all damages, losses, costs and expenses whatsoever.
25. All buildings and improvements which will be made or erected on said premises shall remain on and be surrendered to lessor with said premises at the termination of this lease by lapse of time or otherwise, and lessees agree at the termination of this lease by lapse of time or otherwise to surrender said premises and all buildings, appurtenances and improvements thereon in as good condition as the same now are, ordinary wear and tear and changes herein permitted excepted, and the title free and clear of all liens and clouds. Provided, however, during the first half of the last year of said term of 99 years, but only in case this lease will not have been terminated before that time, if a request be made by lessees of lessor in writing and ten days notice thereof be given, three disinterested appraisers shall be...
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