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222 Ct. Cl.

In Alabama and National, each advertising display was analyzed as a unit. The sign face, supporting structure and cost of installation were treated as a single asset. We did not look to see whether the subcomponents considered separately were inherently permanent.6 In deciding whether this single asset was an inherently permanent structure, we set out a number of factors to look to.

We first inquired whether the property was readily removable. How substantial a job was removal of the property; how many man hours were required? The Tax Court agrees this is a proper factor.7

We were also concerned with whether the property could be readily reused after being removed. In Alabama, we spoke of the floating docks present in Morgan v. Commissioner, 52 T. C. 478 (1969), aff'd per curiam, 448 F.2d 1397 (9th Cir. 1971). We felt it significant that the docks, once moved, could be immediately reused. Once the billboards in Alabama were removed, the salvageable parts were reused whenever practical.

Amount of wastage was also an area of inquiry. If the property was removed, how much of it was wasted? How much of it was left in the ground? Some of the wood and steel posts in Alabama and National were embedded in concrete. When the billboards were removed, the portion of the post below ground level, as well as the concrete surrounding it, was always left in the ground. Whiteco factor number five, though not identical, is similar. 65 T. C. at 673.

We also considered whether, measured at the time the property was affixed to the land, there was an objectively ascertainable likelihood that the property might or would be removed before the expiration of its useful life.9 Alabama discussed the fact that the billboards were on leased property, that the lessor had the right to force their

6 When faced with this same issue, the Tax Court in Whiteco also treated the sign face, supporting structure and cost of installation as a single asset.

7 The fourth Whiteco criterion is similar to this factor. 65 T. C. at 673.

8 Without stating what the maximum permissible amount of wastage is, the amounts in Alabama and National were small enough to not make those advertising displays inherently permanent structures.

9 To this extent, we agree with the trial judge's opinion. The time of installation "is the critical time for determining whether the pole sign is or is not 'tangible personal property' for investment credit purposes." Treas. Reg. $1.48-1(a).

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removal, that the lessee had the legal right to remove the signs and that signs had been regularly moved in the past. The significance of these facts was they were objective evidence of a likelihood that the signs might or would be removed prior to expiration of their useful lives.10 Ownership of the land on which the signs were located and right of summary removal were not meant themselves to be decisive factors. Such an interpretation is to give a narrow reading to Alabama and would ignore our mandate of liberal construction.11 The third Whiteco factor is virtually identical to this factor.12

Two men with a crane can remove the pole sign in a total of 5 to 6 man-hours if the bumper is left in place, or about 9 or 10 man-hours if the bumper is removed. In addition, only one pole supports the assembly, and it can be easily severed with an acetylene torch. Although not clear from our opinions, more man-hours were required for removal of the signs in Alabama and National. Those signs were supported by longer poles and steel beams, there were generally more than one per sign and the sign face was generally larger than these faces. In relation to our prior two cases, these pole signs are readily removable.13

When a pole sign is removed, if the head, face or pole are in good condition they are reused. The head and face require no reworking to prepare them for reinstallation.

10 The Tax Court also placed significance on whether the property in question has been moved in the past. Whiteco Indus., Inc. v. Commissioner, supra at 672 (first criterion). We, however, only view it as evidence of a deciding factor. That court treats this past movement as itself being a factor.

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11 "[W]ith relation to the question of whether structures are inherently permanent improvements, the provision [section 48] must be liberally construed Alabama Displays, Inc. v. United States, 205 Ct. Cl. at 724, 507 F.2d at 848. 12 Whiteco looked to whether there are "circumstances which tend to show that the property may or will have to be moved." 65 T. C. at 672 (emphasis supplied). The presence of "have" shows that court was focusing on legally imposed circumstances such as lessor exercising a right of summary removal. Our fourth factor, though being sometimes evidenced by legal relations, is not to be so narrowly construed. Economic factors and the sign owner's normal business practices can also indicate a likelihood of removal.

13 Measured against the signs in Whiteco, Southland's pole signs should satisfy the Tax Court's fourth criterion. The signs owned by Whiteco, being generally larger and supported by more poles than these pole signs, probably were less readily removable than Southland's signs. While the Tax Court spoke of a removal time of 1%1⁄2 hours, this was for the poles alone and we aren't told how many men were involved. Total man-hours required for removal of an entire display was thus probably more than that needed for these pole signs.

222 Ct. Cl.

All that need be done to the pole is weld a new section on. After being removed, the pole sign can be readily reused.14 If the bumper, and the portion of pole encased in it, is left in place, 8%1⁄2 feet of pole is non-reusable. If the bumper is broken off and the pole cut at ground level, 6 feet is wasted. In both cases, none of the concrete is reusable. The full cost of installation is also lost. This is the portion of the pole sign which is wasted when removal occurs. In Alabama, when a pole embedded in concrete was removed, the pole was cut off at ground level. The portion of pole embedded in concrete, as well as the concrete itself, was wasted. Depending on the type of sign, between 3 and 10 feet would be lost per pole, and each sign was composed of a number of poles. The wastage here is certainly no greater than that in Alabama.15

As discussed above, plaintiff's pre-1970 store closure rate was 9 percent and its pre-1971 rate 12 percent. When plaintiff installed pole signs in 1970 and 1971, it therefore knew there was a likelihood that the stores to which the signs were accessory might be closed. If a store closed, it was Southland's consistent business practice to remove the accompanying pole sign. This meant that at the time of installation, there was an objectively ascertainable likelihood that at least some of these pole signs would be removed before the expiration of their useful lives. It is true as the trial judge pointed out that

*** when the plaintiff establishes a 7-Eleven store and erects a related pole sign *** the plaintiff expects the store to be successful; and the pole sign is erected with the intention and expectation on the part of the plaintiff that the pole sign will be there permanently throughout its useful life.

However, regardless of how much Southland intended and expected a store to succeed, it knew that no matter how carefully it planned, a significant percentage of stores would fail. Its hopes of store success thus do not negate the likelihood of early removal.

14 Once a pole sign is removed, the head, face and pole may not necessarily be reinstalled at the same new location. They may be used at different locations as the need for pole sign components arises. This, however, does not detract from the fact that the pole sign, considered as a single unit, is readily reusable.

15 The wastage is also no greater than in Whiteco. When Whiteco outdoor displays were moved, the portion of pole surrounded by concrete, the concrete itself and the cost of installation were also non-reusable.

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None of plaintiff's leases required it to remove the pole signs on expiration of the lease term. It logically follows that plaintiff was not required to remove the pole sign when a store located on leased land was closed. When Southland closed a store located on its own land, it was not legally required to remove the pole sign. The Government would attach significance to plaintiff's lack of legal obligation to remove the pole signs when it closed stores. Such importance is misplaced. We are focusing on the likelihood of removal and, as pointed out supra note 12, economic factors and normal business practice as well as legal obligations are all relevant evidence. On our facts, what is crucial is that on closing a store, plaintiff's normal business practice was to remove the entire pole sign. Whether it had the legal obligation to do so is beside the point.

It is true that, except in one case, plaintiff either owned the land on which the pole signs were placed or leased the land for a term in excess of the pole signs' useful lives. In addition, none of the leases gave the lessor the legal right to force Southland to remove its signs prior to expiration of the lease. Plaintiff could therefore leave all its signs, except one, in place for their entire useful lives. While this is certainly to be considered in deciding whether there was a likelihood of removal, we feel the store closure rate is more significant. To do otherwise would be to ignore the fact that plaintiff knew stores would be closed and the pole signs removed. Plaintiff's legal right to leave the pole signs in place does not detract from the likelihood of early removal.16

Applying these Alabama factors to the present case, the pole signs, each treated as a single asset, are not inherently permanent structures.17 These pole signs satisfy our requirements to at least the same degree as the outdoor

16 If only a legally imposed circumstance will satisfy the Tax Court's third Whiteco factor, then on our facts this factor would not be met. However, to the extent such factor is based on Alabama, it is a narrow reading and ignores our mandate of liberal construction.

17 On our reading of Whiteco, we do not know how the Tax Court would hold. Its first, fourth, fifth and sixth factors are clearly met. The second should also be satisfied due to these pole signs having the same useful life as Whiteco's billboards. It is the third Whiteco factor which may not be met, see supra note 16, and we do not know how significant this would be.

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222 Ct. Cl.

advertising displays present in Alabama and National. Since the common characteristic of improvements is that they are inherently permanent structures, Whiteco Industries, Inc. v. Commissioner, supra at 671, the pole signs are not improvements to land. Relying on the definition of tangible personal property contained in Treas. Reg. §1.481(c), it is our opinion that these pole signs are tangible personal property.18

This conclusion makes it unnecessary to analyze the face, head, pole, concrete and cost of installation separately to see whether any of these treated individually are inherently permanent. We are also not required to reach plaintiff's argument that section 1033(g)(3) (section 1033(f)(3) for taxable years beginning prior to January 1, 1975) and the Senate Finance Committee Report on the Revenue Act of 1978 (S. Rep. No. 95-1263, 95th Cong., 2d Sess. 117 (1978)) indicate that outdoor advertising structures, such as its pole signs, are tangible personal property. The trial judge's contrary holding was based on a misreading of Alabama and not on a finding that the above four factors were not met. In his view, the critical Alabama criteria were:

(1) The billboards were located in other person's properties, the billboard sites having been leased from the landowners.

(2) There was an express written obligation on the part of the lessee to remove the billboards upon the termination of the leases.

(3) By giving appropriate notice *** a lessor could terminate a lease and require the removal of a billboard at any time.

(4) Under the provisions of the leases, the billboards remained at all times the property of the lessee.

(5) The billboards were not inherently permanent structures and did not otherwise improve the land on which they were located.

As earlier discussed, the first four criteria listed by the trial judge were not meant to be deciding factors. They all went to the question of likelihood of early removal of the

18 Without passing on its significance, we note that any other conclusion would have produced anomalous results. Plaintiff mounted nearly identical advertising signs on its stores. These serve the same advertising function as the pole signs. Under Treas. Reg. §1.48-1(c), the building mounted signs are clearly tangible personal property.

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