NEW CAPITAL HOTEL, INC. V. COMMISSIONER
28 T.C. 706 (1957)
NATURE OF THE CASE: This was a dispute over the tax status of an advance payment. Hotel
(P) sought review of a decision, which determined a deficiency in the P's income tax.
FACTS: P was an accrual basis taxpayer. P leased hotel property for a period of ten
years. The contract provided that the lessee would pay rents of $30,000 per year during each
year of the lease and to pay $30,000 in advance to be applied to the last year of the lease.
When the $30,000 advance payment was made in 1949, P reflected it as an advance rental
payment under a liability account called deposit on lease account. The lease also provided
that in the event the hotel was destroyed, the $30,000 was to be returned less any
deductions for past due rent. P was under no restrictions regarding the usage of the monies
paid in advance. The IRS determined that the $30,000 was gross income in the year received;
under section 22(a).
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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