-19-
Petitioner considered the cost of all demolition done by the
asbestos removal contractors (including the cost of removing the
asbestos tiles) as a removal cost for both book and tax purposes.
Petitioner considered the cost of any demolition done by the
general contractor or one of the subcontractors a remodeling cost
for both book and tax purposes.
All construction-related remodeling costs were added to the
basis of the building and depreciated on a straight-line basis over
31.5 years. The portion of the remodeling costs for furniture and
fixtures was written off over 7 years.
J. Petitioner's Returns and Petitions
On its 1987 and 1988 returns, petitioner claimed neither
depreciation nor ordinary deductions with respect to the costs of
removing the asbestos-containing materials from the Douglas Street
building. On its 1989 return, however, petitioner claimed a $7,696
depreciation deduction and a $902,206 ordinary and necessary
business deduction with respect to such expenditures.
Petitioner asserts in its petitions that it properly deducted
the $902,206 on its 1989 return. In addition, petitioner claims
6(...continued)
Respondent agrees that these amounts properly represent the
asbestos removal costs, except for $2,836.61 paid on Apr. 7,
1989, in settlement of a lien filed by a materialman.
We note, however, that petitioner's general ledger reflects
a $1,945,816 total incurred for the asbestos removal between 1987
and 1989. This amount does not include the cost of replacing the
asbestos-containing materials with asbestos-free materials.
There is no explanation in the record for the discrepancy between
the $1,918,336.07 and the $1,945,816.
Page: Previous 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NextLast modified: May 25, 2011