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In the case of the acquisition on or after March
1, 1913, of a combination of depreciable and
nondepreciable property for a lump sum, as for example,
buildings and land, the basis for depreciation cannot
exceed an amount which bears the same proportion to the
lump sum as the value of the depreciable property at
the time of acquisition bears to the value of the
entire property at that time. * * *
Thus, the relevant inquiry is the respective fair market
values of the depreciable and nondepreciable property at the time
of acquisition. Weis v. Commissioner, 94 T.C. 473, 482-483
(1990); Randolph Building Corp. v. Commissioner, 67 T.C. 804, 807
(1977). Petitioners bear the burden of proving that respondent's
allocation is incorrect. Rule 142(a); see Elliott v.
Commissioner, 40 T.C. 304, 313 (1963).
Petitioners rely on the allocation agreed to by ME and
Country, Inc., the seller of the shopping center. They argue
that the allocation in the purchase and sale agreement is
determinative of the property's fair market value at the time of
acquisition because the transaction was conducted at arm's
length. Respondent cites the value of the land as estimated in
an independent appraisal report and as determined by the Duval
County property tax appraiser's office in arguing that ME's
allocation is improper.
Petitioners have introduced no evidence, other than the
purchase and sale agreement, that supports the allocation claimed
on ME's return. In contrast, two separate appraisals, discussed
infra, convince us that the value of the land constitutes a
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