The opinion
*374 OPINION.
Smith:
In its petition the taxpayer alleges that of the $7,155.20 charged to the “ Improvement Account ” prior to December 31, 1920, $2,535.11 constituted an expense and as such was deductible from gross income in the income-tax return of the taxpayer. The taxpayer alleges that the improvements agreed upon in the contract - of lease were far from being completed at December 31, 1920, and were not continued for the reason that it was foreseen that the improvements originally contemplated would be inadequate to care for the increasing business; that the management of the corporation felt that it would be best to try to cancel the lease and to secure a lease for a flat monthty rental; that the lease was finally canceled and a new one made, effective July 1, 1923, for a period of 75 months.
The taxpayer has offered no evidence to the effect that the improvements contemplated by the lease effective October 1, 1919, were not completed as originally contemplated. The lease provided for im *375 provements to cost $6,000. More than that amount was charged to the Improvement Account.” We think that the action of the Commissioner in holding that the entire amount charged to the “ Improvement Account ” was a capital item and that depreciation upon the same should be taken over the life of the lease was correct. Appeal of National City Bank of Seattle, 1 B. T. A. 139.
The taxpayer also alleged error on the part of the Commissioner in computing the invested capital for the year 1920 in accordance with the provisions of article 845 of Begulations 45 and not in accordance with the rule laid down in Appeal of Guarantee Construction Co ., 2 B. T. A. 1145. The effect of this decision has, however, been nullified by section 1207 of the Revenue Act of 1926. Appeal of Russel Wheel & Foundry Co., 3 B. T. A. 1168.
Order of redetermination will be entered on 15 days' notice, under Rule 50.
Steünhagen concurs in the result only.