Imre and Gizella Cziraki - Page 6

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          by reference to the single, identifiable property damaged or                
          destroyed.  Id.; Trinity Meadows Raceway Inc. v. Commissioner,              
          T.C. Memo. 1998-79; sec. 1.165-7(b)(2)(i), Income Tax Regs.  “A             
          taxpayer may not borrow basis from his unharmed property in order           
          to increase the amount of his loss deduction for an injury to his           
          other property.”  Rosenthal v. Commissioner, 416 F.2d 491, 497-             
          498 (2d Cir. 1969), affg. 48 T.C. 515 (1967).                               
               In the case of land with improvements, the regulations                 
          require that a separate basis be assigned to each depreciable               
          improvement to distinguish it from the land, which is not                   
          depreciable.  Keefer v. Commissioner, supra at 599.  This                   
          distinction is also a valid reason for differentiating business             
          and nonbusiness property.  See also United States v. Koshland,              
          208 F.2d 636, 639-640 (9th Cir. 1953), where the following is               
          noted:                                                                      
                    The most obvious reason for this tax treatment of                 
               business realty is that a building is an exhaustible                   
               asset and therefore subject to depreciation under the                  
               income tax laws, while land is not.  * * *  Thus the                   
               necessity arises of allocating a part of the cost of a                 
               parcel of land with a building upon it to the building                 
               in order to fix its basis for computing depreciation.                  
               * * *  The result is that there is no single “adjusted                 
               basis” for the land and building as a unit.  The                       
               depreciation allowed or allowable on the building                      
               reduces the basis of the building only.  No                            
               depreciation is allowed on the land, and the original                  
               basis of the land therefore remains unaffected.  The                   
               adjusted basis of the building and the basis of the                    
               land cannot be combined into a single “adjusted basis”                 
               for the property as a whole, for to do so would in                     
               effect be reducing the basis of the whole by                           
               depreciation allowed or allowable only as against the                  
               building, a part.  [Citations omitted.]                                




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