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production of income shall be allowed as a depreciation
deduction." Sec. 1.167(a)-1(a), Income Tax Regs. The allowance
is "that amount which should be set aside for the taxable year
* * * so that the aggregate of the amounts set aside, plus the
salvage value, will, at the end of the estimated useful life of
the depreciable property, equal the cost or other basis of the
property". Sec. 1.167(a)-1(a), Income Tax Regs. The basis to be
used is "the adjusted basis provided in section 1011 for the
purpose of determining the gain on the sale or other disposition
of such property." Sec. 167(g).1 In the instant case,
petitioner's basis is the cost of the medical/dental equipment
and the used neon sign.
As evidence of the cost of the items, petitioner introduced
handwritten documents to show various alleged sales of equipment
from petitioner's father to petitioner. At trial, petitioner
testified that petitioner's father used petitioner's money to
purchase the equipment and that the documents were executed to
memorialize the transaction. Petitioner's father's testimony
indicated that the documents, although dated in 1987, 1988, and
1989, were not necessarily prepared contemporaneously with the
purchase of the equipment. No receipts or other independent
1This is the section in effect for property placed into
service during 1987, 1988, and 1989. The section was later
renumbered sec. 167(c) by sec. 11812(a)(1) and (2) of the Omnibus
Budget Reconciliation Act of 1990, Pub. L. 101-508, 104 Stat.
1388, 1388-534, for property placed into service after
November 5, 1990.
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