
    Louis Gassner, Inc., Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 4415.
    Decided October 27, 1926.
    
      Frederick M. Shipper, Esq., and Anson Herrick, G. P. A., for the petitioner.
    
      Donald D. Shepard, Esq., for the respondent.
   Lansdon :

The Commissioner has found a deficiency in income and profits taxes for the years 1920, 1921 and 1922, in the amount of $52.56. The petitioner contends that it is entitled to an annual deduction from its gross income on account of the exhaustion of a certain leasehold which it acquired prior to March 1, 1913, and undertakes to prove a value of such leasehold at that date. The Commissioner contends that the petitioner did not own the leasehold in question at the basic date, or at any other time, and that even if the alleged ownership is established the leasehold was acquired without cost and had no value at the basic date.

FINDINGS OF FACT.

The petitioner is a California corporation, incorporated on February 11, 1909. Its principal office is in San Francisco and its principal stockholders are Louis Gassner and his wife, Henrietta Gassner, but at all times since the date of incorporation there have been other stockholders owning substantial amounts of the capital stock of the petitioner.

On September 26, 1908, Louis and Henrietta Gassner leased from certain parties a certain parcel of real estate, situate in the City of San Francisco, for a term of 15 years, to begin at the completion of a Class C six-story and basement loft building, which was to be erected by the lessor in accordance with plans and specifications approved by the lessees. The lessees agreed to pay rent for such land and building at the rate of $1,550 per month, or a total rental of $279,000, but not to begin such payments prior to July 1, 1909.

After the completion of the building a part of the space therein was occupied by the petitioner and the remainder was subleased to other tenants. The lease was-never assigned by the lessees to the petitioner either directly or by a sublease. The petitioner paid the monthly rentals to the lessor during the term of the lease and collected and took into its income all rentals paid by other tenants. None of the subleases were offered in evidence at the hearing.

Judgment will be entered for the Commissioner.  