- 45 -
determine whether petitioner has satisfied the requirements set
forth in those cases.
c. Application of the Basic Purpose Test
The requirement that the basic purpose of a taxpayer in
constructing a common improvement be to induce sales of benefited
properties serves the purpose of justifying total cost recovery
of the common improvement based on sales of the benefited
properties. Cf. Noell v. Commissioner, supra at 725 n.10
(1976).7 Petitioner apparently acknowledges that a pivotal
question is whether the basic purpose of the Bank in constructing
the Atrium was to induce sales of the Bank's adjoining
properties. That question is one of fact, which we shall answer
upon consideration of all the facts and circumstances. See
Willow Terrace Dev. Co. v. Commissioner, 40 T.C. 689, 701 (1963).
Petitioner asserts: “The Bank constructed the Atrium for
the purpose of creating an office building complex with the
expectation that the buildings within the complex would increase
in value.” That purpose alone, however, without an intention to
7 Such total basis recovery is a decided advantage not
generally enjoyed by a taxpayer who disposes of less than his
complete interest in property. See, e.g., sec. 1.61-6(a), Income
Tax Regs. (“When a part of a larger property is sold, the cost or
other basis of the entire property shall be equitably apportioned
among the several parts, and the gain realized or loss sustained
on the part of the entire property sold is the difference between
the selling price and the cost or other basis allocated to such
part.”). Consider that a lessor of income producing property
must take advance rentals into gross income in the year of
receipt, sec. 1.61-8(b), Income Tax Regs., without any increased
depreciation deduction in that year.
Page: Previous 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 NextLast modified: May 25, 2011