Starr's Estate v. Commissioner
United States Court of Appeals for the Ninth Circuit
274 F.2d 294 (1959)
Relevant factsFree
Starr (plaintiff) leased a fire sprinkler system for $1,240 annually over five years ($6,200 total, compared to a normal $4,960 purchase price), with an option to renew for five more years at just $32 annually or have the lessor remove the system, which -- being custom-made -- would have little value if actually removed; Starr deducted the full $6,200 as rental expense, but the Tax Court agreed with the Commissioner (defendant) that the payments were actually capital expenditures.
IssueFree
Whether, for tax purposes, a rental agreement whose practical effect is to pass title may be treated as a sale.