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unable to obtain a permit for development of the Elbow Lake
property under the 1989 Manual requirements. As a consequence,
Lakewood did not want to incur the expense of completing the
permit application.
In 1991, the Corps ceased use of the 1989 Manual per
statutory requirements in the Energy and Water Development
Appropriations Act of 1992, Pub. L. 102-104, 105 Stat. 510
(1991). As of September 1991, the Corps reverted to using the
1987 Manual, which became mandatory for local divisions of the
Corps. All permit applicants with applications pending at that
time and subject to the 1989 Manual were given the option to
resubmit their applications under the 1987 Manual. Lakewood met
with representatives of the Corps in 1992 and 1993 regarding
delineation of wetlands on the Elbow Lake property under the 1987
Manual.
Lakewood's adjusted basis in the Elbow Lake property was
$13,268,320. On its 1989 income tax return, Lakewood treated the
issuance of the 1989 Manual as a regulatory taking, or
condemnation, of the Elbow Lake property and claimed an ordinary
loss deduction under sections 165 and 1231(a) with respect to the
property in the amount of $9,849,682. The amount of the claimed
loss deduction represents approximately 74 percent of Lakewood's
adjusted basis in the property, which is the portion of the Elbow
Lake property determined to be protected wetlands under the 1989
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Last modified: May 25, 2011