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obsolete and, instead, required that leasehold improvements be
subject to the MACRS-prescribed recovery periods. With respect
to petitioner’s claim that the expenditures to convert the
facility to a bingo operation were lease acquisition costs,
respondent contends that most of the expenditures were made
subsequent to the time that the lease was in effect.
Furthermore, petitioner has not shown, as he is required to, that
the expenditures were for lease acquisition costs, as opposed to
leasehold improvements, as reported by November and determined by
respondent.
Accordingly, we hold that respondent’s determination that
petitioner is not entitled to a 10-year recovery period is
sustained. Further, we hold that petitioner has failed to show
that November is entitled to deduct any portion of the
expenditure as a lease acquisition cost.
Is November Entitled To Deduct the $5,500 Portion of the
$12,293.36 Monthly Payment to the Lichtys’ Entity?
Prior to and after the settlement of the lawsuit, November
and the Lichtys’ entity were obligated to pay $6,793.36 rent for
use of the Chestnut property. The note executed from petitioner
and/or November to the Lichtys also called for a $5,000 monthly
payment for a period of years. After the settlement, November
was required to pay to the Lichtys’ entity $12,293.36, which
amount was $5,500 more than the $6,793.36 rental payment.
November claimed the $12,293.36 monthly payments as rent.
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