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regard to whether the costs would qualify as incurred under the
economic performance rule of section 461(h), but the amount of
such costs that would qualify for this allocation was limited in
any 1 year to the total cumulative amount of actual construction
costs for common improvements that, as of the end of each year,
the developer had incurred in the entire development.
Under Rev. Proc. 92-29, as under Rev. Proc. 75-25, use of
the alternative cost method was limited to estimated costs of the
common improvements that the developer was contractually
obligated to construct in the development and that would not be
recoverable by the developer through depreciation. The limited
alternative cost method as set forth in Rev. Proc. 92-29 applies
to the year before us in these cases.
$3,707,662 in Estimated Clubhouse Construction Costs
The disagreement between the parties regarding allocation of
VRI’s estimated Clubhouse construction costs under the
alternative cost method centers on whether VRI, at any time,
would have been able to recover its actual construction costs in
the Clubhouse through depreciation. See Rev. Proc. 92-29,
sec. 2.01, 1992-1 C.B. 748, 749.
Petitioners contend that at no time during construction of
the Clubhouse beginning in 1994 and after construction through
the transition period would VRI have had the right to recover its
Clubhouse construction costs through depreciation.
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