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Safway Steel Scaffolds Co. of Georgia v. United States

590 F.2d 1360 (1979)

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Safway Steel Scaffolds Co. of Georgia v. United States

United States Court of Appeals for the Fifth Circuit
590 F.2d 1360 (1979)

Facts

The two sole shareholders of Safway Steel Scaffolds Company of Georgia (Safway) (plaintiff) purchased commercial land. Safway leased the land under a 20-year nonrenewable lease from its shareholders and constructed a commercial building on it. The building had a useful life of 34 years. Upon the end of the lease term, the building and all other improvements reverted to the shareholders according to the terms of the lease, with no payments to Safway for the residual value of the building. Subsequently, a new lease was signed for rent in the amount of $1,800 per month, which was a fair rental amount for the property. Safway deducted the entire amount as rent. The Internal Revenue Service (defendant) disallowed 45 percent of the rent payments, which was the portion of the rent allocable to the improvements that were built by Safway. Safway paid the assessment and sued for a refund in the district court, which affirmed the assessment. Safway then appealed to the United States Court of Appeals for the Fifth Circuit.

Rule of Law

Issue

Holding and Reasoning (Thornberry, J.)

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