
    Estate of George B. Leonard Holding Corporation, Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 48871.
    Promulgated May 11, 1932.
    
      William E. Shrewsbury, Esq., for the petitioner.
    
      W-. F. Wattles, Esq., for the respondent.
   OPINION.

Van Fossan:

The first item in controversy is denominated “organization expenses,” incurred in connection with the organization of taxpayer corporation. We know nothing more about it. Such items as legal and accounting fees paid for similar purposes were held to be not deductible as ordinary and necessary expenses of the year in which incurred in First National Bank of St. Louis, 3 B. T. A. 807. See also Clarence Whitman & Sons, Inc., 11 B. T. A. 1192. Apparently these expenses were of similar character and they should be similarly treated.

The second item is identical with that considered by the court in Bormit Teller & Co., 53 Fed. (2d) 38, where it was held that such an expenditure should be prorated over the life of the lease, excluding possible, but not assured, renewal terms. A similar treatment should be had here. Respondent was correct in requiring proration, but erred .in the inclusion of two possible renewal terms in the period. The correct period is 21 years. See also Central Bank Bloch Association v. Commissioner, 57 Fed. (2d) 5, affirming 19 B. T. A. 1183.

The remaining item is one-half the cost of premium on a performance bond given to insure completion of a building erected by petitioner on the leased land. This item should also be prorated over the life of the lease. The reasoning underlying the above cited cases applies with equal force to this expenditure. It was a necessary incident to the erection of a building which will be utilized over the life of the lease. It takes its character from the nature of the expenditure to which it adheres. Presumptively, the building will outlast the first term of the lease, but, since renewal thereof is optional, we are of opinion that the item should be spread over the fixed life of the lease and not over an estimated life of the building.

Decision will be entered under Buie 50.  