Appeal of William Scholes & Sons, Inc.

*599 OPINION.

MoRRis:

It was argued on behalf of the taxpayer that, whether the improvements were ordinary and-necessary expenses or capital expenditures, the cost thereof was deductible in 1920. From the designation of the items, and in the absence of evidence to the contrary, we conclude that they were capital expenditures, the cost of which is not deductible in the return for 1920, unless the nature of the lease under which the property was held justifies such deduction. Appeal of Simmons & Hammond Manufacturing Co., 1 B. T. A. 803. Counsel has submitted ample authority to convince us that the taxpayer was a tenant at will and that the tenancy was subject to termination by the lessors at any time. On the record in this appeal, it does not follow, however, that these capital expenditures are deductible as ordinary and necessary expenses.

The ownership of the stock of the corporation and of the real estate was vested in the Scholes family, all the members thereof having an interest in the real estate being stockholders of. the corporation. The business of the corporation has been conducted on the leased property continuously from 1906 to the present time. We have already considered a similar contention based on a similar state *600 of facts in the Appeal of Sentinel Publishing Co., 2 B. T. A. 1211, except that, in that appeal, the tenancy was from year to year. The decision in that appeal is controlling here. Accordingly, the cost of the improvements made by the taxpayer in 1920 should be prorated over their useful life. See also Appeal of Walle & Co., Ltd., 1 B. T. A. 1064; Appeal of Thatcher Medicine Co., 3 B. T. A. 154.