Wilshire Holding Corporation v. Commissioner of Internal Revenue
Opinion
Opinion
Under a 1929 instrument called a “lease” affecting a single piece of real estate in Los Angeles, Wilshire Holding Company’s predecessor agreed to pay a total of $679,380.00 in “rent” over a period of 68 years to Walburga Oesterreich, owner. At the end of the term the “lessee” would acquire full title by making a nominal payment of ten dollars.
On income tax consequences of the transaction, we have had two companion cases, Oesterreich v. Commissioner, 9 Cir., 226 F.2d 798 , and Commissioner of Internal Revenue v. Wilshire Holding Corporation, 9 Cir., 244 F.2d 904, 905 . The two cases came up simultaneously from the Tax Court.
For some years after the “lease” was executed the Commissioner of Internal Revenue accepted it as it was labeled, giving the “lessee” a deduction for “rent” payments and charging the lessor with receipt of ordinary income. Eventually, the Commissioner reversed himself, taking the position on subsequent installments that they were payments on a purchase price, not rent. The issues went to the Tax Court, which as to both taxpayers, took the view that the labels on the agreement were correct and held Commissioner’s second position was wrong.