-7-
The parties disagree over the proper basis to be used to
determine the section 1.165-7(b)(1), Income Tax Regs.,
limitation. Petitioners argue that the road at issue is not a
separate object, but is part of the real property that surrounds
it. Therefore, petitioners assert that the basis limitation
should be $220,000, petitioners’ total combined basis in
properties A and B (exclusive of the road extension constructed
in 1984). Respondent contends that the road should be viewed as
a separate object with its own basis and value. Respondent also
contends that because petitioners did not present any evidence
about a separate basis in the dirt/gravel road, petitioners’
casualty loss is limited to their claimed cost basis in the 1984
extension, $6,844. We agree with respondent.
For purposes of section 1.165-7(b)(2)(i), Income Tax Regs.,
a road is a single, identifiable piece of property. See Trinity
Meadows Raceway, Inc. v. Commissioner, supra (horse racing track
is a separate, identifiable piece of property for purposes of
sec. 1.165-7(b)(2)(i), Income Tax Regs.). The road at issue was
an improvement on petitioners’ property that required significant
time and effort to construct. The fact that Mr. Cziraki
personally constructed most of the road does not alter the
principle that the road is still a separate, identifiable piece
of property. Moreover, we note that petitioners were
depreciating the 1984 road extension up until the year at issue,
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