¶1dissenting: There seems to be no doubt that the amount paid for the cancellation of the lease is not to be added to the cost of acquiring the fee and that it is deductible at some time. The only provisions of the Revenue Act of 1921 which appear to have any application to the question presented are as follows:
Sec. 214. (a) That in computing net income there shall be allowed as deductions:
(1) All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business; …
… =St …
(5) Losses sustained during the taxable year and not compensated for by insurance or otherwise, if incurred in any transaction entered into for profit, though not connected with the trade or business; …
… …
(8) A reasonable allowance for the exhaustion, wear and tear of property used in the trade or business, …
¶2I can not agree with the prevailing opinion which apparently proceeds upon the theory that the petitioner, in extinguishing the leasehold interest, acquired property which was subject to exhaustion under paragraph 8, supra. He was the owner of the fee. Out of this he had granted a leasehold. This he wished to extinguish and he paid to secure that result. He did not thereupon become the owner of a lease for six years. Under well known principles of law, the leasehold estate merged in the greater estate, the fee. The prevailing opinion will permit deductions for the exhaustion of the leasehold over a period of six years. During none of those years will there be any leasehold to exhaust. There seems no warrant in the statute for any such treatment of this expenditure. If the cost of extinguishing the leasehold is to be treated as a capital expenditure, to be recovered over a period of years, it seems to me that it can only be done on the ground that the payment was made to remove an obstacle in the way of the new lease, that it is therefore a part of the cost of securing such new lease and is to be exhausted over the life of the new lease. The life of the new lease, however, is not found. Furthermore, the findings are that the new lease was made subsequently to the cancellation of the old. How long a period elapsed is not shown, nor is there any *386showing or even any inference that the old lease was canceled to permit the new one to be. made.
¶3In Higginbotham-Bailey-Logan Co. v. Commissioner, 8 B. T. A. 566, the owner of the fee leased a portion of the premises for a term of years but, finding that the nse of the property was necessary in its business, paid a certain sum to cancel the lease. We there held that such payment fell within paragraph (1), supra, and was deductible in the year when paid or incurred. The instant case may or may not fall within the same paragraph, the facts found being insufficient to indicate either the business of the petitioner or the necessity of procuring a cancellation of the lease.
¶4This case, it seems to me, must fall within either paragraph (1) or (5), supra. Petitioner, having once owned an unencumbered fee, had made a lease which he subsequently found cumbersome. To undo his prior act, to reestablish his unencumbered fee, he paid $10,000. He placed himself back in the position that he had occupied before he took the step which he later retraced. Is not the amount paid to cancel a contract and to reestablish a position which had previously existed either an ordinary and necessary expense of the business, if it relates to a business, or a loss in a transaction which was entered into for profit, if it be that it is not connected with any business regularly carried on by the petitioner ? I believe it to be either one or the other, the evidence being insufficient to establish which.
¶5For the reasons stated, I can not agree with the view expressed in the majority opinion.