David C. Hutchinson, et al. - Page 16

                                       - 16 -                                         
          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.                          

Page:  Previous  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  Next

Last modified: May 25, 2011