Market Supply Co. v. Commissioner

1926 BTA LEXIS 2536 | B.T.A. | 1926

Lead Opinion

OPINION.

James:

For some years prior to 1918 the taxpayer had been engaged in the mercantile business, occupying a store on what is known as “Long Wharf,” at Boston, Mass. Prior to June, 1918, the United States Government, as a war measure, required the erection of gates at the entrance to the wharf and permitted no one to enter without proper credentials. This so interfered with the taxpayer’s business that it found it necessary either to secure a new store location or practically to suspend operations. In seeking a new location, the taxpayer found that it could, and it finally did on June 17, 1917, purchase the business and the right to the store location of one of its competitors. In making such purchase, the competitor’s stock of merchandise and equipment was inventoried and valued, and the taxpayer paid such inventory value, plus the sum of $6,000, and accepted from said competitor a bill of sale in the form and language set forth in the foregoing findings of fact.

It appears from the foregoing bill of sale that the taxpayer acquired the right to occupy a store location as a tenant at will, the merchandise of the seller, his contracts, the good will of his business, the right to use the vendor’s name in connection with its business for a period of two years, and the abstention of the vendor from engaging in a like business for a period of 10 years. The benefits accruing to the taxpayer appear to be the benefit of continuing in business unembarrassed by war regulations, the retention of its own customers, the acquisiton of the customers of Gallagher, the abstention of Gallagher from business, and the right to use Gallagher’s name for two years. It is impossible under the evidence to separate the consideration paid for these various rights, some of which are presumably of permanent benefit to the taxpayer. It might be conceded that the tenancy in Gallagher’s location was of little permanent value. It might be conceded that the use of Gallagher’s name would also be of temporary benefit, but the acquisition of Gallagher’s business and customers, and the abstention of Gallagher from further engaging in business for a period so long as to take him practically permanently out of the field of competitors were benefits difficult to estimate at all, and the duration of which it is particularly difficult to estimate. Certainly, it can not be said that the benefit flowing from these provisions of the contract is limited, as claimed by the taxpayer, to the period of two years during which it was permitted to hold itself out as the successor to M. J. Gallagher & Co. We are, therefore, of the opinion that the amount paid in excess of inventory value of merchandise was a capital expenditure of such indefinite duration that it can not properly be said to exhaust over any particular period, and no deduction for such exhaustion may be allowed, unless or until a definite loss can be and is established.

Trtjssell dissents.