*1
control
Since
over the
jobbers
the unlawful
estab
lished and maintained
licensing device,
resort to
suppressed
it
rightly
though
even
decree
it
had been
or
to
used
might
be
for
lawful purposes.
continue
some
to frame its decree
court was bound
so as to. sup
unlawful
such
press
practices
and to take
reasonable
measures as
their revival. Local
preclude
would
167 v.
States,
293;
United
S.
Co.,
U.
Warner & Co. v. Lilly &
U.
532.
It
exercise
could,
S.
.of
disc
its
retion,
that could
accomplished
whether
consider
effectively
disestablishing
without
licensing system,
and whether
reasons
there
countervailing
for con
it as
necessary
or
tinuing
proper means
appellant
lawful
carry
out other
Since
purposes.
the court
rightly
these
concluded
reasons were without sub
weight,
properly suppressed
stantial
means by
which the unlawful restraint was achieved. Local 167 v.
States, supra, 299, 300;
United
cf. Merchants Warehouse
States,
Co. v.
Affirmed. Mr. and Mr. McReynolds Justice Justice Roberts took no part consideration or decision of this case.
HELVERING, COMMISSIONER OF INTERNAL
REVENUE, v. BRUUN. Argued February 28, No. 479. 1940. Decided March *2 Raum, Solicitor Jack- with whom General Mr. Arnold Clark, General and Mr. Sewall son, Attorney Assistant brief, petitioner. on the Key were respondent. H. McEvers for Mr. John *3 opinion delivered Justice Roberts Mr. Court. as- petitioner’s controversy origin had its
The gain from the respondent realized taxable that the sertion having new tenant erected a leasehold, a forfeiture of court below held premises. The building upon the Inconsistency of deci- no had realized.1 income been subject led us to certiorari. grant sions on the find- no Appeals independent Tax The Board of made stipulation a ings. cause submitted re- appears July From facts. this on owner, building and the leased a lot of land spondent, as ninety-nine years. thereon term of for a might, the lessee at provided any time, lease bond to rentals upon giving accruing two secure any or tear ensuing years, remove down on building no land, provided should be or removed the lease torn down after became or forfeited, during and years last three one-half of the term. The lessee was land, upon termination the lease, surrender buildings all thereon.
In 1929 the tenant demolished and removed the exist- ing building and constructed a new one which had useful fifty life of not more than years. July 1, 1933, the lease was cancelled default in payment of rent and respondent regained taxes possession of land building. *4 stipulated parties The “that at as said date, 1, July 1933, the which had been erected upon said by the lessee had a premises fair- market $64,- value of 245.68 and the unamortized of cost the old building, from which was removed premises the in 1929 to make way for the new building, was $12,811.43, thus leaving net fair market value as at July 1, 1933, of $51,434.25, for
1Helvering Bruun, v. 105 F. 2d 442.
465 the upon premises building erected new aforesaid the the lessee.” determined facts, petitioner the basis of these
theOn $51,- net gain realized a of respondent in 1933 the determination and overruled his the The Board 434.25. Board’s affirmed the decision. Appeals of Circuit Court judicial practice administrative de of The course question presented has not been respect in of the cision adjusted the Treasury In 1917 the ruled uniform.- upon premises leased is improvements installed value of upon the termination of the lease.2 income to lessor the succeeding incorporated two editions ruling In 1919 Circuit Treasury Regulations.3 Court of the Gearin, the Ninth Circuit held Miller v. of Appeals was invalid as the regulation gain, 225, 258 F. when the year as of the all, if taxable must taxed at improvements completed.4 were impose amended to regulations accordingly completion of of im- year a tax at anticipated their value provements, measured duration discounted for the of lease and termination regulations permitted Subsequently the lease. of depreciated improve- value of spread the lessor life an remaining lease, reporting over the ments provision upon prema- year, that, each aliquot part imposed upon should be termination, a the excess tax ture over the amount then returned.5 theretofore for the Appeals the Circuit Court of Second
In 1935
Commissioner,
in Hewitt Realty Co. v.
decided
Circuit
2
2442,
D.
76 F. 2d that a landlord received no taxable income during in a year, lease, the term of the in which his tenant erected a on the leased land. court, while the lessor need recognizing that not receive money taxable, to be based its decision that no taxable was reálized in that case' on the fact that improvement portable was or detachable from land, not and if re- except moved would worthless as bricks, iron, and (p. 884): question mortar. It said as we “The view it is whether the value received is embodied in something disposable, or separately merged whether is so financially to become a part land as of it, something though it which, value, increases its has no of its value away.” when own torn invalidated regulations decision
This then in force.6
In 1938 this court decided M. E. Blatt Co. United v. States, There, 267. 305 U. S. connection with the ex- lease, landlord ecution of and tenant mutually agreed should make certain that each improvements premises and that demised those made the tenant should become and remain property of the landlord. The Commissioner valued as of the they made, date depreciation allowed thereon to the leasehold, termination divided the depreciated years value the number of the lease to run, had found the landlord taxable for year’s each aliquot portion His thereof. was sustained by the action . Court of Claims. judgment was reversed ground on the added could not be considered rental accruing over the period lease; that the facts found by Court of Claims did not support the conclusion of the Commissioner as to the value to be attributed to the im- 6The Hewitt in Hilgenberg followed v. States, United case Supp. 453; Staples F. v. United Supp. 737, States, 21 F. English Bitgood, Supp. v. F. provements throughout after a use term lease; *6 that, and in disclosed, any circumstances the enhancement in realty of in the tax year the value the was not income by realized lessor within the Revenue the Act. of
The circumstances the instant differentiate it case cases; from Blatt but the petitioner’s the and Hewitt con- that was realized when the gain respondent, tention lease, forfeiture of the obtained untrammeled through of and control the title, possession premises, the added by building, added increment of value the new in the Miller to the runs counter to the decision case and in reasoning the Hewitt case. realty, capital that the asset respondent
The insists —a lease, of such of execution the at the date the —remained im- its that throughout expiration; term after the part realty became oí the to the soil provements affixed in that such capital asset; blended the indistinguishably as separately cannot be valued or treated improvements improvements on exchange in the received which date of that lease; at the the execution of the the .land in they as are, therefore, category the same land, the to his or of value respondent added accruals adventitious circumstances. Such due to extraneous gain value, argu'ed, capital is can considered added The posi- of the asset. disposition the only upon owner’s consequent the en- gain upon is that the economic tion not gain asset is derived recaptured value of hanced the Six- meaning of realized within the capital from or Amendment, may not, therefore, be taxed teenth apportionment. without in right petitioner ?,-sessing was hold that
We in realized as gain upon issue pre- decision the narrow our might rest
We stipulation. It ap- of the does not the terms sented by was building of a the tenant kind erected pear what from readily was removable building or whether the in the whether the difference stated land. It is not in removed and erected building value between an increase in the value accurately reflects its place in. land. single considered estate land and as more, we not be stipulated, On facts without should of the cor- holding presumption warranted determination Commissioner’s has been rectness of the overborne. however, stipulation respondent insists, of 151,434.25 intended to assert that the sum was resulting enhancement
measure date of at the the cancellation of lease. real estate seems not to contest this Even view. petitioner assumption we think amount this *7 respondent in of by year named was realized the the repossession. respondent successfully can not that the contend in (a) §
definition of income of the gross Revenue Act is not broad enough of 19327 to embrace in< gain the That definition closely follows question. the Sixteenth Essentially the respondent’s Amendment. position is Amendment does permit not the that the taxation of apportionment without gain amongst such the stateip. what in was said Hewitt Realty He relies Co. v. Commissioner, and supra, upon expressions found in the of this court dealing decisions the taxability of stobk effect gain to dividends the derived from capitjal something must of exchangeable be value proceeding from from severed property, capital, the in- however vested or and employed, received the fir recipient separate use, benefit, disposal.8 his He emphasizes necessity gain thei separate from capital disposable. separately These expressions, however, 7 209, c. 47 Stat. 178. Macomber, 8 See Eisner v. 189, 207; United U. S. States v.
Phellis, 257 U. S. between an ordinary the distinction clarify used to were meant They to dividend. and a stock dividend the stockhold- dividend, in of a stock show that the case after of corporate receipt assets er’s interest from same as inseverable dividend was the We was declared. which before dividend he owned here. they controlling think are not always is not tax- gain if is true While that economic gain of the realization as it is settled income’ able from of an asset. derived sale need not be cash pay- exchange property, Gain occur a result of may as from lia- indebtedness, relief taxpayer’s ment of the aof completion from the bility, or other realized profit portion is a gain fact that transaction.9 The in the trans- taxpayer received property its realization. negative action does not transaction, respond- of a business Here, as a result it, with a new on back his land ent received value. is ascertainable amount its It which added an to recognition of taxable necessary gain not that he improvement sever the begetting should be able to original If capital. from his necessary, that were arise from exchange no income' could of property; always has been recognized such gain whereas as realized gain. taxable
Judgment reversed. *8 The Chief concurs the result view Justice stipulation of facts. the terms McReynolds took part no in the decision Mr. Justice of this case.
9 134; 262 Walker, Cullinan v. U. Marr v. United 268 States, S. 536; Colony 716; U. S. Co. v. U. S. Commissioner, Old Trust 1; v. Kirby Co., Helvering v. Ameri U. S. States Lumber United 426; Co., can U. S. U. S. Hendler, Chicle United States v.