Estate of Delano T. Starr, Deceased, Mary W. Starr, and Mary W. Starr v. Commissioner of Internal Revenue

Yesterday’s equities in personal property seem to have become today's leases. This has been generated not a little by the circumstance that one who leases as a lessee usually has less trouble with the federal tax collector. At least taxpayers think so.

But the lease still can go too far and get one into tax trouble. While according to state law the instrument will probably be taken (with the conse quent legal incidents) by the name the parties give it, the internal revenue service is not always bound and can often recast it according to what the service may consider the practical realities. We have so held in Oesterreich v. Commissioner, 9 Cir., 226 F.2d 798 , and Commissioner of Internal Revenue v. Wilshire Holding Corporation, 9 Cir., 244 F.2d 904 , certiorari denied 355 U.S. 815 , 78 S.Ct. 16 , 2 L.Ed.2d 32 . The principal case concerns a fire sprinkler system installed at the taxpayer’s plant at Monrovia, California, where Delano T. Starr, now deceased, did business as the Gross Manufacturing Company. The “lessor” was “Automatic” Sprinklers of the Pacific, Inc., a California corporation. The instrument entitled “Lease Form of Contract” (hereafter “contract”) is just about…