-6-
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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