- 21 - (1986). Consequently, a stockholder normally is not entitled to depreciate property of his corporation because he lacks a direct economic interest or investment in the property itself. See Hunter v. Commissioner, 46 T.C. 477, 489-490 (1966). Generally, a taxpayer’s capital investment in the property is the cost of acquiring the depreciable property. See Durkin v. Commissioner, supra; secs. 167(c), 1011, 1012; sec. 1.1012-1(a), Income Tax. Regs. Petitioners contend that their depreciable basis is derived from the lenders' assignments to them of security interests in the property. This presents a question of whether, under State law, a security interest affords petitioners an ownership interest sufficient to entitle them to claim depreciation. State law is determinative of the parties' rights and interests, and Federal law is determinative of the Federal income tax consequences of those rights or interests. Morgan v. Commissioner, 309 U.S. 78, 80 (1940); Lucas v. Earl, 281 U.S. 111 (1930); Sampson v. Commissioner, 81 T.C. 614, 618 (1983), affd. without published opinion 829 F.2d 39 (6th Cir. 1987). Generally, California law provides that a security interest in personal property is given to secure a payment or performance of an obligation and not to acquire personal property. See Cal. Com. Code sec. 1201(37)(a) (West Supp. 1996). The holder of a security interest is denominated a secured party. The priorityPage: Previous 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Next
Last modified: May 25, 2011