Sandy Lake Road Limited Partnership, J. Steve Anderson III, Tax Matters Partner - Page 11

                                       - 11 -                                         
          production of income.  The last sentence of section 164(a)                  
          provides an exception in that notwithstanding the second                    
          sentence, certain taxes are required to be capitalized.  Thus,              
          any tax, other than any of those itemized in the first sentence,            
          which is paid or accrued in connection with the acquisition or              
          disposition of property, is to be treated as a cost of the                  
          acquired property or as a reduction in the amount realized on the           
          disposition of property, as the case may be.                                
               The last sentence of section 164(a) was added by section               
          134(a)(1) of TRA 1986, 100 Stat. 2116.  According to the                    
          conference report, there previously was uncertainty as to whether           
          certain taxes incurred in a trade or business or an income-                 
          producing activity could be deducted or had to be capitalized.              
          The conference report explains that the new provision was added             
          to make it clear that State, local, or foreign taxes (other than            
          real property taxes and certain other specified taxes) that are             
          incurred in a trade or business or in an income-producing                   
          activity in connection with the acquisition or disposition of               
          property are to be capitalized.  H. Conf. Rept. 99-841 (Vol. 2),            
          at II-20 (1986), 1986-3 C.B. (Vol. 4) 20.                                   
              In the case before us petitioner would deem it advantageous            
          to have SLR capitalize the rollback taxes.  For example, section            
          68 places an overall limitation on itemized deductions in cases             
          where the adjusted gross income of individuals exceeds an                   
          "applicable amount".  (The shares of the realized gain on the               




Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011