David C. Hutchinson, et al. - Page 12

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          under the alternative cost method and were properly allocated by            
          VRI to the lots sold in 1994 and in subsequent years.                       
               With respect, however, to VRI’s $3,707,662 in total                    
          estimated construction costs of the Clubhouse (all of which                 
          related to depreciable improvements to the Property), respondent            
          concluded that VRI’s alleged retained ownership of the Clubhouse            
          before and during the transition period (during which time VRI              
          allegedly would have been able to recover its costs thereof                 
          through depreciation) disqualified VRI from using the alternative           
          cost method to allocate to the lots sold the estimated Clubhouse            
          construction costs.                                                         
               Further, respondent concluded that VRI’s $5,861,595 in                 
          estimated future-period interest expense with respect to its debt           
          obligations relating both to the Golf Course and to the Clubhouse           
          did not qualify as estimated construction costs under the                   
          alternative cost method and could not be allocated to the cost of           
          the lots sold.                                                              
               Procedurally, petitioners do not object to respondent’s                
          change in position and to respondent’s new contentions regarding            
          VRI’s use of the alternative cost method for its estimated                  
          Clubhouse construction costs and estimated interest expense                 
          relating to the Golf Course and to the Clubhouse.  Petitioners,             
          however, argue that respondent should have the burden of proof              
          regarding any underlying factual disputes relating to                       

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