Metropolitan Building Company v. Commissioner of Internal Revenue

MERRILL, Circuit Judge.

The question presented by this case involves the owner of real property, his lessee and a sublessee. The sublessee wished to enter into a desirable arrangement directly with the owner and to this end to eliminate the intervening interest of the lessee-sublessor. He paid a sum of money to the lessee, in consideration of which the lessee released to the owner, his lessor, all his right and interest under his lease.

The question presented is whether the sum so paid to the lessee is to be regarded entirely as the equivalent of rent owed to the lessee and taxable to the…