Rothenberg v. Commissioner

*666 The Commissioner has determined deficiencies in income tax for the years 1918 to 1922, inclusive, in the amount of $7,580.71. Only the deficiency asserted for the year 1920 is in controversy. It arises from the addition by the Commissioner to the petitioner's gross income for 1920 of the amount of $5,000 received for that year in connection with the lease or rental of certain business premises.

*667 FINDINGS OF FACT.

The petitioner is an individual residing in San Francisco, Calif. During the year 1920 he received the amount of $5,000 from the lessee of certain business premises owned by himself. This $5,000 was received in conformity with the terms of a lease, the pertinent provisions of which are as follows:

The said sum of Five Thousand ($5,000.00) Dollars, paid by the Lessee to the Lessors, shall not be deemed to be any part of the rental provided herein for the said premises, but is a flat consideration and compensation paid to the Lessors for entering into this lease, but the Lessors hereby agree with the Lessee that if the*2815 Lessee well and truly performs all of the terms, covenants and conditions herein provided to be performed by him, then, and in that event, but not otherwise, the Lessee shall pay as rent for the fifty-second to sixtieth months, both inclusive, of the term herein created, the sum of Twenty ($20.00) Dollars on the first of each and every month beginning on the fifty-second month of said term, and to and including the sixtieth month of said term; otherwise, said Lessee shall pay for said months the sum of Five Hundred and Seventy-five ($575.00) Dollars per month on the first day of each and every month.

It is further agreed by and between the parties hereto that in the event that the herein demised premises are totally destroyed, as that term is used hereinafter, by fire or the elements, or other cause, without the negligence of the Lessee, before the fifty-second month of the term herein created, then and in that event the said Lessors agree to return to the said Lessee the consideration for this lease, to-wit, the sum of Five thousand ($5,000.00) Dollars;

That for and in consideration of the sum of Five Thousand ($5,000.00) Dollars, lawful money of the United States*2816 of America, in hand paid by the Lessee to the Lessors, the receipt whereof by the Lessors is hereby acknowledged, and in consideration of the rents, covenants and agreements hereinafter mentioned and contained, to be paid, kept and performed by the Lessee, and subject to the payment of said rents and the performance of said covenants and agreements by the Lessee and on condition that said rent shall be paid and that each and all of the said covenants and agreements shall be duly and fully performed by the Lessee as hereinafter provided, the Lessors have leased, demised and let * * *.

The petitioner reported no part of the $5,000 payment received in 1920 in conformity with the terms of the lease in question in his income-tax return for that year. Upon audit of such return the Commissioner added $5,000 to the petitioner's income for the year.

OPINION.

LANSDON: The amount of $5,000 received on account of the lease of business premises was income to the petitioner for the year 1920. ; *2817 .

Judgment will be entered after 20 days' notice, under Rule 50.