Estate of Walburga Hedrick v. Commissioner of Internal Revenue

This tax case has its roots in a lease made by Walburga Oesterreich, later Walburga Hedrick, with Wilshire Amusement Corporation, predecessor of Wilshire Holding Corporation. The lease was for 68 years and dated September 11, 1929. At the end of the term, there was an option to acquire the property for a ten dollar payment.

A prerequisite for the reading of this opinion is a familiarity with the prior opinions on this same lease:

Early we held that the commissioner could recast the transaction into a sale and later we held that an appropriate interest rate should be considered. On the third remand to the tax court, we ordered that Wilshire could compute the interest rate for a deduction at 12% per annum. Now the Hedrick estate petitions us for relief when it is charged in the tax court in its separate proceeding with receiving 12% interest, or thereabouts.

The taxpayer says collateral estoppel applies and it should be charged with no interest income because of our first Oesterreich decision, supra. We reject the contention.

The first Oesterreich case held that Walburga Oesterreich was entitled to treat the payments from Wilshire as long term capital gain; Wilshire was…