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is incurred. Our interpretation is also consistent with the
requirement under Rev. Proc. 92-29, 1992-1 C.B. 748, 749, that to
qualify for allocation under the alternative cost method the
“developer must be contractually obligated or required by law to
provide” the improvements relating to the estimated cost. VRI
was contractually obligated under the Contract to construct the
Golf Course and the Clubhouse. VRI, however, was not obligated
under the Contract to obtain interest-bearing debt for such
endeavor and merely chose to finance construction of the Golf
Course and the Clubhouse based on its current financial condition
and presumably could have paid off such debt at any time.4
Petitioners rely on Haynsworth v. Commissioner, 68 T.C. 703
(1977), affd. without published opinion 609 F.2d 1007 (5th Cir.
1979), in support of their position that estimated future-period
4 Rev. Proc. 92-29, sec. 2, 1992-1 C.B. 748, 749, defines
common improvements as follows:
.01 Common Improvement. For purposes of this revenue
procedure, the term “common improvement” means any real
property or improvements to real property that benefit
two or more properties that are separately held for
sale by a developer. The developer must be
contractually obligated or required by law to provide
the common improvement and the cost of the common
improvement must not be properly recoverable through
depreciation by the developer. * * * Examples of common
improvements include streets, sidewalks, sewer lines,
playgrounds, clubhouses, tennis courts, and swimming
pools that the developer is contractually obligated or
required by law to provide and the costs of which are
not properly recoverable through depreciation by the
developer.
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