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liquidate its entire investment in the Project at a
profit by selling the homesites and memberships. In
furtherance of that purpose, on the very day that VRI
acquired the Project, VRI also entered into a Purchase
and Sale Agreement with the Club, a non-profit membership
corporation, under which VRI irrevocably committed itself
to construct golf-related improvements and to convey
those improvements (the Club Facilities) to the Club,
retaining only the right to proceeds from the sale of a
specified number of Club memberships, and placing the
title to the Club Facilities in escrow to protect its
interest in those sale proceeds. * * *
We conclude that respondent has failed to meet his burden of
proving that, during the transition period, VRI, not VCI,
possessed the benefits and burdens of ownership of the Clubhouse.
Also, apart from the burden of proof on this fact issue, we
conclude that the evidence establishes that, during the
transition period, VCI possessed the benefits and burdens of
ownership of the Clubhouse. The estimated construction costs
associated with the Clubhouse, therefore, are not to be regarded
as recoverable by VRI through depreciation during the transition
period.
Because VRI would not be able to recover its construction
costs through depreciation during either the construction period
or the transition period, VRI’s estimated construction costs
relating to the Clubhouse may be allocated to the bases of the
residential lots sold in 1994 under the alternative cost method
of Rev. Proc. 92-29, subject to the limitations thereof.
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