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how much VRI had received in membership fees and regardless of
the amount of VRI’s losses in connection with operation of the
Clubhouse during the transition period.
Under the Contract, until transfer of title from the escrow
to VCI, VRI was required to fund any deficit and to retain any
net income from operating the Clubhouse. VCI, however, during
the transition period had control over the amount of dues charged
to members, and VCI thereby largely controlled the income or loss
to be realized from operation of the Clubhouse.
With regard specifically to a depreciable ownership interest
in property, in Commissioner v. Moore, 207 F.2d 265, 268 (9th
Cir. 1953), revg. and remanding 15 T.C. 906 (1950), the Court of
Appeals for the Ninth Circuit stated:
It is not the physical property itself, nor the
title thereto, which alone entitles the owner to claim
depreciation. The statutory allowance is available to
him whose interest in the wasting asset is such that he
would suffer an economic loss resulting from the
deterioration and physical exhaustion as it takes
place. * * *
See also Weiss v. Weiner, 279 U.S. 333 (1929); Geneva Drive-In
Theatre, Inc. v. Commissioner, 622 F.2d 995 (9th Cir. 1980).
In petitioners’ post-trial brief, petitioners accurately
summarize the transaction before us as follows:
VRI acquired the Project for a single purpose -- to
create (1) valuable homesites abutting a first-class golf
course and (2) valuable golf club memberships and to
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