Alvin Victor Bracey - Page 12

                                       - 12 -                                         
          believe in any event that the rules with respect to the treatment           
          of legal fees incurred in connection with the purchase of real              
          estate are relatively simple and clear.  Thus, we do not find               
          reasonable cause for the error under section 6664(c)(1).  On this           
          record, we sustain respondent's determination that the                      
          underpayment arising from this disallowed deduction is subject to           
          an accuracy-related penalty under section 6662(b)(1).                       
          Depreciation                                                                
               Petitioner claimed $6,970 of depreciation on Schedule C of             
          his 1991 return to which the parties now stipulate he was not               
          entitled.  The amount represents depreciation claimed with                  
          respect to the house petitioner purchased in Florida in 1990.               
          Petitioner held the house throughout 1991, attempted to rent it,            
          and obtained insurance designed to provide coverage for a rental.           
          He was unsuccessful in renting the house and eventually moved               
          into it himself, although the record does not disclose when.                
          Respondent asserts that it was negligent for petitioner to                  
          depreciate a house that he never rented and into which he                   
          eventually moved.  We think petitioner's negligence depends upon            
          whether, given the circumstances, he reasonably believed that the           
          property was depreciable.                                                   
               Section 167(a) allows a depreciation deduction only if the             
          property is either used in a trade or business or held for the              
          production of income.  The phrase "held for the production of               
          income" includes the expectation of gain from the disposition of            




Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  Next

Last modified: May 25, 2011