David C. Hutchinson, et al. - Page 23

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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            
               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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