W. W. Lawrence & Co. v. Commissioner

*1204OPINION.

It is the contention of this taxpayer that the City of Pittsburgh has taken, a portion of its land and building for public use without having made just compensation therefor, and it produced at the hearing some testimony which was intended to prove that the 10 front feet, approximating 2,050 square feet, of its land fronting on West Carson Street which was taken by the city, had a value of approximately $20,000. It, therefore, claims a deduction from gross income for the taxable period during which the city appropriated this land for public use, on the ground that the value of the land taken was a total loss.

It appears from the record that the City of Pittsburgh proposed, by proper action, to take by condemnation proceedings the front 10 feet of the taxpayer’s land and to require the removal of that portion of the taxpayer’s building which stood upon land proposed to be taken. Had the original plans of the city proceeded without change the taxpayer would have been entitled to have this portion of its property appraised and damages awarded. But this proceeding ivas not carried out. When the taxpayer became aware of the threatened proceedings it entered into a negotiation with the city authorities and, purely as a business transaction between parties, each proposing to protect its own interests, the taxpayer offered to exchange its right to use the land desired by the city and its right to the ground floor portion of its building standing upon such land in consideration of being allowed to arcade the building and continue in the undisturbed possession and use of the three upper floors of the building. The taxpayer sought this solution of the situation to avoid disturbance to or disorganization of its business and the expense of remodeling the upper floors of its building. The city accepted the proposal of the taxpayer and granted to it the privilege of having the first story of its building arcaded and the upper floors remain undisturbed ; the city paying the expense of such changes as were found necessary in the building. The consideration passing from the City of Pittsburgh to this taxpayer was the continued, undisturbed possession and use of the three upper floors of its building projecting over the sidewalk of the widened street, and a proportionately less interference with the taxpayer’s business.

Where a portion of a property is taken for public use, the measure of damages is the difference between the value of the property before the taking and the value of what remains after the taking. But in the situation shown by the record of this appeal, even if we should accept the theory of the taxpayer that the property taken had a value of $20,000, we must, in measuring any claimed loss, deduct from that *1205$20,000 the advantages accruing to the taxpayer from its arrangement and agreement with the city. The first of these advantages was the privilege of having the three upper stories of its building remain undisturbed and projecting over the sidewalk of the widened street, and the second advantage was the benefit to the taxpayer of being permitted to carry on its business during the process of street widening without interference except as to one floor of its building. The taxpayer plainly anticipated that the arrangement agreed to by the city would permit the taxpayer to realize profits from its business during the period of reconstruction, of which it would otherwise be deprived, and in this appeal it has made no effort to show what such profits may have been or the amount of such profits which must be subtracted from any claimed loss before such loss can be allowed as a deduction from income.

By virtue of its arrangement with the city the taxpayer also retained the undisturbed possession of the front 10 feet of the upper three floors of its building, approximately 3,000 square feet of floor space, extending over the sidewalk of the widened street. It retains this floor space for an indefinite period, and the rental value of this floor space standing over the street for an indefinite period must be a very considerable amount. Such amount, whatever it may be, must also be subtracted from the claimed damages for loss of property taken. The taxpayer has offered no evidence as to the value of this concession to it by the city.

Thus, even allowing that the value of the property taken may have been the amount claimed by the taxpayer, we are left without sufficient information concerning the value of the advantages accruing to it which must be subtracted from such damages, and therefore we must assume that the benefits accruing to the taxpayer are at least equal to the damages sustained.

Having taken the view of the situation as above outlined, we are forced to the conclusion that the taxpayer has failed to prove that it has sustained any deductible loss during the taxable period in question, and that the Commissioner’s rejection of the deduction claimed must be approved.