- 43 -
two; or whether, on the other hand, he so encumbered
his property with rights running to the property owners
(regardless of who retained nominal title) that he in
substance disposed of these facilities, intending to
recover his capital, and derive a return of his
investment through the sale of the lots.10 * * *
10Actually, in most of the cases, the asset
involved is encumbered with rights running to the
property owners which significantly diminish the value
of an asset which nevertheless retains substantial
value. This diminution, resulting from restrictions
benefiting the adjacent lots, represents a pro tanto
disposal with each lot. However, there is no basis in
the decided cases, and certainly none in the record
before us, for making an allocation based on the rights
disposed of and the property retained.
See also Derby Heights, Inc. v. Commissioner, 48 T.C. 900 (1967);
Dahling v. Commissioner, T.C. Memo. 1988-430; Bryce's Mountain
Resort, Inc. v. Commissioner, T.C. Memo. 1985-293; Montclair Dev.
Co. v. Commissioner, T.C. Memo. 1966-200.
b. The Principles of the Developer Line of Cases
The developer line of cases all involve real estate
developers that seek to allocate the cost of certain common
improvements to the bases of residential lots held for sale.
Respondent suggests that the principles of the developer line of
cases are applicable only in that context because, “[i]n that
context, both the purpose for incurring the costs and the
properties benefitted thereby are readily identifiable.” An
examination of the principles underlying the developer line of
cases, however, does not suggest that those principles are
restricted to any particular factual context or that difficulty
in application justifies nonadherence. We need not decide
Page: Previous 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 NextLast modified: May 25, 2011