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Section 167 provides, in part, for a depreciation deduction
with respect to property used in a trade or business.
Depreciation allows the taxpayer to recover the cost of the
property used in a trade or business or for the production of
income. United States v. Ludey, 274 U.S. 295, 300-301 (1927);
Southeastern Bldg. Corp. v. Commissioner, 3 T.C. 381, 384 (1944),
affd. 148 F.2d 879 (5th Cir. 1945). To substantiate entitlement
to a depreciation deduction, the taxpayer must show that the
property was used in a trade or business (or other profit-seeking
activity). In addition, the taxpayer must establish the
property's depreciable basis. E.g., Delsanter v. Commissioner,
28 T.C. 845, 863 (1957), affd. 267 F.2d 39 (6th Cir. 1959);
Kerrigan v. Commissioner, T.C. Memo. 1995-483; Greenway v.
Commissioner, T.C. Memo. 1980-97.
Petitioner has failed to substantiate any depreciable basis
for the office equipment. According to petitioner's testimony,
he obtained a loan in the amount of $10,000, which he used to
purchase various pieces of office equipment in 1988 or 1989.
However, petitioner has failed to present detailed testimony, the
loan agreement, or any other documentation such as receipts,
invoices, or canceled checks to substantiate the cost of such
equipment. Thus, petitioner has failed to substantiate any
depreciable basis for the equipment. Moreover, petitioner has
failed to substantiate the extent to which the office equipment
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Last modified: May 25, 2011