Midler Court Realty, Inc. v. Commissioner of Internal Revenue

OPINION OF THE COURT

ROSENN, Circuit Judge.

This appeal from the Tax Court presents an issue of first impression in this court. The appellants, Midler Court Realty, Inc. and its three wholly owned subsidiaries (Midler), are corporations engaged in the ownership and leasing of commercial real estate. Midler purchased certain land with buildings thereon subject to existing leases which provided relatively high rental for an initial term but also provided that the lessee could renew at substantially reduced rentals. Midler claimed that a portion of its cost in the properties should be allocated to…