- 21 -
interest paid during 1991 from this information, but were unable
to arrive at the amount claimed by petitioner.8
Section 167 allows as a depreciation deduction a reasonable
allowance for the exhaustion, wear and tear of property used in a
trade or business, or property held for the production of income.
Under section 168, depreciation for residential rental property
is calculated based on the straight line method using a recovery
period of 27.5 years. Sec. 168(a), (b)(3), (c)(1).
The record does not include the original cost of the land or
completed house. However, the record does indicate that the cost
to complete the house was at least $44,000. Assuming the
depreciable basis of the house to be $44,000, the maximum
allowable depreciation deduction would be $1,600.
We believe, and so hold, that sufficient interest and
depreciation deductions are available to eliminate any gain with
respect to this property; of course, no loss is allowable.
To reflect the resolution of the issues set forth above,
Decision will be
entered under Rule 155.
8 Based on our calculations, the total mortgage payments
for 1991 should have been $4,398.84, consisting of $2,971.91 in
interest and $1,426.93 in principal payments.
Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Last modified: May 25, 2011