Rev. Rul. 57-361

The cost to a lessee of marking permanent improvements on property, of which it is the lessee, is a capital investment and is not deductible as a business expense. If it is reasonably certain that a lease can be renewed beyond its stated term by a lessee, due to circumstances such as, for example, stock ownership in a corporate lessee by the landowners and their families, the entire useful life of such business improvements made by the lessee is the proper period for determining allowable depreciation deductions, rather than any shorter period which may be stated as the term or renewal term of the lease, since the ultimate term of the lease is indefinite in such circumstances. See section 39.23(a)-10(b) of Regulations 118, made applicable to the Internal Revenue Code of 1954 by Treasury Decision 6091, C.B. 1954-2, 47, with respect to the treatment by a lessee of his costs of capital improvements made on leased property; see also Standard Tube Co. v. Commissioner , 6 T.C. 950, at 955, acquiescence C.B. 1946-2, 5, and Elmira Arms Co. v. Commissioner , 7 B.T.A. 703, at 706.