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Petitioners claimed straight-line depreciation deductions on this
property (the Sister Bay property) of $1,920 for each of the
years 1990 and 1991. In the notices of deficiency, respondent
disallowed the entire amounts claimed for the reason that
petitioners had not established their cost or basis for the
property.7
Petitioners acquired the Sister Bay property in two stages--
an undivided one-half interest in 1988 and the other one-half
interest in 1989. They submitted in evidence two quitclaim deeds
to substantiate their acquisition of these undivided interests.
The deeds, however, make no recitation of the consideration paid
for the property. The property was acquired from Mrs. Zeidler's
parents, and petitioners contend they paid $70,400 for the
property. Petitioners calculated their depreciation for 1990 and
1991 based on $52,800 as the cost of the house and improvements,
with a useful life of 27.5 years.
Petitioners contend the $70,400 cost of the property was
paid by them, as follows:
$18,400 in satisfaction of a prior loan by Mrs. Zeidler to her parents
40,000 in cash that petitioners received over a period of 2 years as gifts
from Mr. Zeidler's parents
8,000 approximately the amount petitioners paid in cash from their own
funds
4,000 approximately an amount owing by Mrs. Zeidler's parents to
petitioners for work Mr. Zeidler performed on the retirement
home of Mrs. Zeidler's parents in North Carolina
$70,400 TOTAL
7
This is the issue referred to in supra note 5.
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