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C. Depreciation
Section 167(a) allows "as a depreciation deduction a
reasonable allowance for the exhaustion, wear and tear * * * of
property used in the trade or business, or * * * of property held
for the production of income." The depreciable basis of property
acquired by purchase is cost. See sec. 167(g). If depreciable
and nondepreciable property, such as improved real estate, is
bought for a lump sum, the purchase price must be allocated
between the land (nondepreciable property) and the depreciable
improvements (e.g, buildings). See sec. 1.167(a)-5, Income Tax
Regs. Depreciation deductions may not be claimed until an asset
is placed in service. Rybak v. Commissioner, 91 T.C. 524, 561
(1988); sec. 1.167(a)-10(b), Income Tax Regs.
On its 1985 return, Good Shepherd claimed a deduction for
depreciation of $13,583, based on a total cost basis for
depreciable property of $833,000. We assume that such
depreciable property is a portion of the property. Deductions
for depreciation as set forth in our findings of fact were
claimed by Good Shepherd for 1986 through 1987. In our findings
of fact, we have recited a description of the property as an
improved 86-acre tract. Petitioners have proposed, although we
have not found, that the purchase price paid by Good Shepherd for
the property was over $1 million. Petitioners have failed to
show on what basis Good Shepherd allocated the purchase price of
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