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In respondent’s notices of deficiency to petitioners,
respondent determined that the development and sale of VRI’s
residential lots, on the one hand, and the Golf Course and
Clubhouse, on the other hand, constituted two separate
development projects (i.e., that the Golf Course and Clubhouse
were not improvements common to the development of the
residential lots) and that VRI therefore could not, under the
alternative cost method, allocate to the residential lots the
costs of constructing the Golf Course and the Clubhouse.
As explained, in respondent’s pretrial memorandum,
respondent abandoned the contention that the residential lots,
the Golf Course, and the Clubhouse constituted separate projects,
and for the first time respondent contended that VRI, not VCI,
owned the completed Clubhouse, had a depreciable interest in the
Clubhouse, and would have been able to recover its actual
construction costs through depreciation, and therefore that VRI
could not use the alternative cost method to allocate its
estimated Clubhouse construction costs to its bases in the
residential lots.
The evidence relevant to whether development of the
residential lots, the Golf Course, and the Clubhouse constituted
a single project is quite different from the evidence required of
petitioners to prove, as between VRI and VCI, ownership of, and
the existence of a depreciable interest in, the Clubhouse.
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