Since the unlawful control over the jobbers was established and maintained by resort to the licensing device, the decree rightly suppressed it even though it had been or might continue to be used for some lawful purposes. The court was bound to frame its decree so as to suppress the unlawful practices and to take such reasonable measures as would preclude their revival. Local 167 v. United States, 291 U. S. 293; Warner & Co. v. Lilly & Co., 265 U. S. 526, 532. It could, in the exercise of its discretion, consider whether that could be accomplished effectively without disestablishing the licensing system, and whether there were countervailing reasons for continuing it as a necessary or proper means for appellant to carry out other lawful purposes. Since the court rightly concluded that these reasons were without substantial weight, it properly suppressed the means by which the unlawful restraint was achieved. Local 167 v. United States, supra, 299, 300; cf. Merchants Warehouse Co. v. United States, 283 U. S. 501, 513. Affirmed. MR. JUSTICE MCREYNOLDS and MR. JUSTICE ROBERTS took no part in the consideration or decision of this case. HELVERING, COMMISSIONER OF INTERNAL REVENUE, v. BRUUN. CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE EIGHTH CIRCUIT. No. 479. Argued February 28, 1940.-Decided March 25, 1940. 1. Where, upon termination of a lease, the lessor repossessed the real estate and improvements, including a new building erected by the lessee, an increase in value attributable to the new building was taxable under the Revenue Act of 1932 as income of the lessor in the year of repossession. P. 467. Argument for Respondent. 309 U.S. 2. Hewitt Realty Co. v. Commissioner, 76 F. 2d 880, and decisions of this Court dealing with the taxability vel non of stock dividends, distinguished. P. 468. 3. Even though the gain in question be regarded as inseparable from the capital, it is within the definition of gross income in § 22 (a) of the Revenue Act of 1932; and, under the Sixteenth Amendment, may be taxed without apportionment amongst the States. P. 468. 105 F. 2d 442, reversed. CERTIORARI, 308 U. S. 544, to review the affirmance of a decision of the Board of Tax Appeals overruling the Commissioner's determination of a deficiency in income tax. Mr. Arnold Raum, with whom Solicitor General Jackson, Assistant Attorney General Clark, and Mr. Sewall Key were on the brief, for petitioner. Mr. John H. McEvers for respondent. That gain from capital be taxable as income, it is essential that there be a growth or increment of value which is separable from the capital and available for the owner's benefit and disposal. Eisner v. Macomber, 252 U. S. 189, 207; United States v. Phellis, 257 U. S. 156, 168169; Merchants Loan & Trust Co. v. Smietanka, 255 U. S. 509, 519-520; Taft v. Bowers, 278 U. S. 470, 482; United States v. Safety Car Heating & L. Co., 297 U. S. 88, 99. It must be cash or readily reducible to cash. Burnet v. Logan, 283 U. S. 404, 413-414; Commissioner v. Wood, 107 F. 2d 390, 395; Champlin v. Commissioner, 71 F. 2d 23, 29; Schoenheit v. Lucas, 44 F. 2d 476, 479480; Mount v. Commissioner, 48 F. 2d 550, 552; Bourn v. McLaughlin, 19 F. 2d 148, 150. Otherwise, a capital tax and not an income tax results. Koshland v. Helvering, 298 U. S. 441, 445-446; Goodrich v. Edwards, 255 U. S. 527, 535. A building erected upon the premises by the lessee attaches to and becomes a part of the realty either at 461 Argument for Respondent. the time of its erection, Holtgreve v. Sobolewski, 326 Mo. 412, 422; see, Havens v. Fire Ins. Co., 123 Mo. 403, 419; Climer v. Wallace, 28 Mo. 556-559, or upon termination of the lease, Shelton v. Jones, 66 Okla. 83; Hughes v. Kershow, 42 Colo. 210. It is simply an increment of value in the property, not unlike the result of a good bargain, and does not constitute taxable income. Palmer v. Commissioner, 305 U. S. 63, 68–69; Rose v. Trust Co., 28 F. 2d 767, 776, 778; Commissioner v. Van Vorst, 59 F. 2d 677, 680; Taplin v. Commissioner, 41 F. 2d 454; Rossheim v. Commissioner, 92 F. 2d 247, 249; Omaha National Bank v. Commissioner, 75 F. 2d 434, 436; Everhart v. Commissioner, 26 B. T. A. 318; Geeseman v. Commissioner, 38 B. T. A. 258, 264, acquiesced in by the Commissioner, C. B. 1939-1, p. 13. These principles have often been accepted and applied adversely to the government's contention. M. E. Blatt Co. v. United States, 305 U. S. 267; Commissioner v. Center Investment Co., 108 F. 2d 190; Commissioner v. Wood, 107 F. 2d 869; Helvering v. Bruun, 105 F. 2d 442; Nicholas v. Fifteenth Street Investment Co., 105 F. 2d 289; Dominick v. United States, 24 F. Supp. 829; English v. Bitgood, 21 F. Supp. 641; Staples v. United States, 21 F. Supp. 737; Hilgenberg v. United States, 21 F. Supp. 453; Hewitt Realty Co. v. Commissioner, 76 F. 2d 880; Cryan v. Wardell, 263 F. 248; Miller v. Gearin, 258 F. 225. Contra, the Court of Claims in M. E. Blatt Co. v. United States, 23 F. Supp. 461, and the District Court for the Western District of Kentucky in Kentucky Block Coal Co. v. Lucas, 4 F. Supp. 266, both of which were overruled by this Court in M. E. Blatt Co. v. United States, supra. The Board of Tax Appeals has also consistently held likewise. Opinion of the Court. 309 U.S. MR. JUSTICE ROBERTS delivered the opinion of the Court. The controversy had its origin in the petitioner's assertion that the respondent realized taxable gain from the forfeiture of a leasehold, the tenant having erected a new building upon the premises. The court below held that no income had been realized.1 Inconsistency of the decisions on the subject led us to grant certiorari. The Board of Tax Appeals made no independent findings. The cause was submitted upon a stipulation of facts. From this it appears that on July 1, 1915, the respondent, as owner, leased a lot of land and the building thereon for a term of ninety-nine years. The lease provided that the lessee might, at any time, upon giving bond to secure rentals accruing in the two ensuing years, remove or tear down any building on the land, provided that no building should be removed or torn down after the lease became forfeited, or during the last three and one-half years of the term. The lessee was to surrender the land, upon termination of the lease, with all buildings and improvements thereon. In 1929 the tenant demolished and removed the existing building and constructed a new one which had a useful life of not more than fifty years. July 1, 1933, the lease was cancelled for default in payment of rent and taxes and the respondent regained possession of the land and building. The parties stipulated "that as at said date, July 1, 1933, the building which had been erected upon said premises by the lessee had a fair market value of $64,245.68 and that the unamortized cost of the old building, which was removed from the premises in 1929 to make way for the new building, was $12,811.43, thus leaving a net fair market value as at July 1, 1933, of $51,434.25, for 461 Opinion of the Court. the aforesaid new building erected upon the premises by the lessee." On the basis of these facts, the petitioner determined that in 1933 the respondent realized a net gain of $51,434.25. The Board overruled his determination and the Circuit Court of Appeals affirmed the Board's decision. The course of administrative practice and judicial decision in respect of the question presented has not been uniform. In 1917 the Treasury ruled that the adjusted value of improvements installed upon leased premises is income to the lessor upon the termination of the lease.2 The ruling was incorporated in two succeeding editions of the Treasury Regulations. In 1919 the Circuit Court of Appeals for the Ninth Circuit held in Miller v. Gearin, 258 F. 225, that the regulation was invalid as the gain, if taxable at all, must be taxed as of the year when the improvements were completed.* The regulations were accordingly amended to impose a tax upon the gain in the year of completion of the improvements, measured by their anticipated value at the termination of the lease and discounted for the duration of the lease. Subsequently the regulations permitted the lessor to spread the depreciated value of the improvements over the remaining life of the lease, reporting an aliquot part each year, with provision that, upon premature termination, a tax should be imposed upon the excess of the then value of the improvements over the amount theretofore returned." In 1935 the Circuit Court of Appeals for the Second Circuit decided in Hewitt Realty Co. v. Commissioner, 2 T. D. 2442, 19 Treas. Dec. Int. Rev. 25. 'Regulations 33 (1918 Ed.) Art. 4, ¶ 50; Regulations 45 (2d 1919 Ed.) Art. 48. This court denied certiorari, 250 U. S. 667. 5 T. D. 3062, 3 Cum. Bull. 109; Regulations 45 (1920 Ed.), Art. 48; Regulations 62, 65, and 69, Art. 48; Regulations 86, 94, and 101, Art. 22 (a) -13. 215234°-40 -30 |