-28-
(1948), affd. 177 F.2d 200 (6th Cir. 1949); and Illinois Merchants
Trust Co. v. Commissioner, 4 B.T.A. 103 (1926)), respondent
continues, the condition necessitating the repair resulted from a
physical change in the property's condition. In this case, no
change occurred to the building's physical condition that
necessitated the removal expenditures. The only change was in
petitioner's awareness of the dangers of asbestos. Accordingly,
respondent argues that the Plainfield-Union test is inapplicable,
and the Court must examine other factors to determine whether an
increase in the building's value occurred.
Respondent also disagrees with petitioner's reliance on Rev.
Rul. 94-38, supra, arguing that the present facts are
distinguishable. The remediated property addressed in the ruling
was not contaminated by hazardous waste when the taxpayer acquired
it. The ruling permits a deduction only for the costs of
remediating soil and water whose physical condition has changed
during the taxpayer's ownership of the property. Under this
analysis, the taxpayer is viewed as restoring the property to the
condition existing before its contamination. Thus, respondent
contends, unlike Rev. Rul. 94-38, petitioner's expenditures did not
return the property to the same state that existed when the property
was constructed because there was never a time when the building was
asbestos free. Rather, the asbestos-abatement costs improved the
property beyond its original, unsafe condition.
Page: Previous 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 NextLast modified: May 25, 2011