Union Carbide Foreign Sales Corporation, et al. - Page 27





                                        - 27 -                                         
          sway the thinking of the appellate court that expressly disagreed            
          with the Cleveland Allerton Hotel, Inc. holding.21                           
               Accordingly, at the time of the enactment of section                    
          167(c)(2), the weight of case authority did not permit the relief            
          sought by petitioner.  More significantly, in affirming the                  
          Second Circuit Court of Appeals, the Supreme Court’s holding in              
          Millinery Ctr. Bldg. Corp. v. Commissioner, supra, resulted in               
          the same outcome as the one prescribed by section 167(c)(2);                 
          i.e., no allocation of the acquisition cost to the lease was                 
          permitted in circumstances where a leased asset is acquired.                 
          Further, both the case precedent and the statute require that all            
          of the cost be allocated to the depreciable capital asset.22                 


               21 Respondent attempts to resolve these entangled                       
          circumstances by reference to our holding in Golsen v.                       
          Commissioner, 54 T.C. 742 (1970), affd. 445 F.2d 985 (10th Cir.              
          1971).  There we expressed the view that we would conform to the             
          holding of a Federal Court of Appeals that is squarely on point,             
          irrespective of whether we agree with that Court of Appeals’                 
          holding.  We have specifically disagreed with the holding of the             
          Court of Appeals for the Sixth Circuit’s Cleveland Allerton                  
          holding.  See Millinery Ctr. Bldg. Corp. v. Commissioner, 21 T.C.            
          817, 823-824 (1954), affd. in part, revd. in part 221 F.2d 322               
          (2d Cir. 1955), affd. 350 U.S. 456 (1956).  The appeal of this               
          case, as noted above, will be to the Court of Appeals for the                
          Second Circuit, which agreed with our holding and disagreed with             
          the Court of Appeals for the Sixth Circuit.  See Millinery Ctr.              
          Bldg. Corp. v. Commissioner, 221 F.2d at 323.                                
               22 Where land with improvements was acquired, the courts                
          have permitted the excess of the purchase price over the value of            
          the land to be allocated to the building, a depreciable asset.               
          In the present case, no such nondepreciable asset (such as land)             
          is involved, and under sec. 167(c)(2) all of the acquisition cost            
          is to be allocated to the acquired leased property.                          





Page:  Previous  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  27  28  29  Next

Last modified: May 25, 2011