U.S. Court of Appeals for the Fifth Circuit, 1948

Limericks, Inc. v. Commissioner of Internal Revenue

U.S. Court of Appeals for the Fifth Circuit · Decided January 23, 1948 · Sibley, Holmes, Waller

165 F.2d 483; 36 A.F.T.R. (P-H) 649; 1948 U.S. App. LEXIS 3956 (Federal Reporter, Second Series)

Counsel

Howell Ward, of Corpus Christi, Tex., for petitioners., Austin Hoyt, Sewall Key, Helen R. Car-loss and Maryhelen Wigle, Sp. Assts. to Atty. Gen., Theron L. Caudle, Asst. Atty. Gen., and Charles Oliphant and Bernard D. Daniels, both of Washington, D. C., for respondent.

Cases that cite this one

52 later published cases cite this decision. The 25 that cite it most often are listed here.

Potter Electric Signal and Manufacturing Company, a Corporation v. Commissioner of Internal Revenue (8th Cir. 1961)
J. H. Robinson Truck Lines, Inc. v. Commissioner of Internal Revenue (5th Cir. 1950)
Drobny v. Commissioner (United States Tax Court 1986)
Kenneth A. Murry and Helen J. Murry v. Commissioner of Internal Revenue, Lakeside Garden Developers, Inc. v. Commissioner of Internal Revenue (5th Cir. 1979)
Wassenaar v. Commissioner (United States Tax Court 1979)
Levenson & Klein, Inc. v. Commissioner (United States Tax Court 1977)
Latham Park Manor, Inc. v. Commissioner (United States Tax Court 1977)
Kuper v. Commissioner (United States Tax Court 1974)
American Lithofold Corp. v. Commissioner (United States Tax Court 1971)
Mackinac Island Carriage Tours v. Commissioner (United States Tax Court 1970)
Sparks Nugget, Inc. v. Commissioner (United States Tax Court 1970)
Emmerson v. Commissioner (United States Tax Court 1965)
Merritt v. Commissioner (United States Tax Court 1962)
Potter Electric Signal & Mfg. Co. v. Commissioner (United States Tax Court 1960)
Silverman v. Commissioner (United States Tax Court 1957)
58th St. Plaza Theatre, Inc. v. Commissioner of Internal Revenue. Brecher v. Commissioner of Internal Revenue (2d Cir. 1952)
Consolidated Apparel Co. v. Commissioner (United States Tax Court 1952)
W. H. Armston Co., Inc. v. Commissioner of Internal Revenue. Armston v. Commissioner of Internal Revenue (5th Cir. 1951)
Commissioner of Internal Revenue v. Lincoln Electric Co. (6th Cir. 1949)
Hunt & Sons, Inc. v. Comm'r (United States Tax Court 2002)
Associated Dentists v. Commissioner (United States Tax Court 1998)
Lim v. Commissioner (United States Tax Court 1998)
Seminole Thriftway, Inc. v. United States (United States Court of Federal Claims 1998)
Wy'East Color v. Commissioner (United States Tax Court 1996)
Form Builders, Inc. v. Commissioner (United States Tax Court 1990)

This list shows which later cases cite this one. It does not say how they treated it, and no review of that has been done. Not a substitute for Shepard’s or KeyCite — verify before relying.

Opinion

*484 HOLMES, Circuit Judge.

This petition for review involves a deficiency in federal income and excess profits taxes for the years 1941, 1942, and 1943. The question presented is whether certain amounts paid by the taxpayers’ transferor during the period in question to its president and principal stockholder as part of rent for a building used by the corporation constituted in reality a distribution of profits.

Rental payments, to be allowed as deductions from gross income, must be those required to be made as a condition to the continued use of the property. Section 23(a) (1) (A) of the Internal Revenue Code and its concomitant regulations allow, as a deduction from gross income, ordinary and necessary business expenses, including amounts paid as rentals or other payments required to be made as a condition to the continued use or possession of property to which the taxpayer has not taken and is not taking title, or in which he has no equity. The statute contains no express limitation with respect to the reasonableness of the amounts as a condition to deduction, but rentals or other payments for the use of property which are excessive in amount, taking into consideration all the facts of the particular case, do not constitute ordinary and necessary business expenses, or payments required to be made as a condition to the continued use of the property. 1

The Tax Court was not bound to accept the form of this transaction between a corporation and its principal stockholder at face value, but was required to make a careful scrutiny to determine how much of the amount, if any, was actually dividends distributed in the guise of rent. 2 The statute does not permit the deduction of an amount which is in no sense a legitimate business expense. The substance of the transaction is for the Tax Court to determine upon the appraisal of all the facts, and its decision must be sustained if there is a rational basis for its conclusion. 3

We think the Tax Court was justified in finding that the premises under consideration here were greatly over-valued as to rental, and the judgment appealed from is affirmed.

Palace Theatre v. United States, 7 Cir., 148 F.2d 30; Greenspun v. Commissioner, 5 Cir., 150 F.2d 917.

Gregory v. Helvering, 293 U.S. 465, 55 S.Ct. 266, 79 L.Ed. 596, 97 A.L.R. 1355; Higgins v. Smith, 308 U.S. 473, 60 S.Ct. 355, 84 L.Ed. 406.

Dobson v. Commissioner, 320 U.S. 489, 64 S.Ct. 239, 88 L.Ed. 248, rehearing denied, 321 U.S. 231, 64 S.Ct. 495, 88 L.Ed. 691; Commissioner v. Court Holding Co., 324 U.S. 331, 65 S.Ct 707, 89 L.Ed. 981.

Case-law data current through December 31, 2025. Source: CourtListener bulk data.