Joseph A. Morcos and Joann M. Morcos - Page 6

                                        - 5 -                                         
               Petitioners depreciated the carriage house as a separate               
          dwelling unit at 100 percent of its cost basis (determined based            
          on its square footage as a percentage of the square footage of              
          the main house and carriage house combined) plus its renovation             
          costs.  Based on a total of seven people using the grounds, five            
          of whom were renters, petitioners depreciated 71 percent of the             
          $95,000 petitioners spent on grounds’ improvements ($80,000 on              
          pool/garden areas and $15,000 on driveway/parking areas).                   
               Respondent determined that petitioners incorrectly                     
          calculated depreciation on their 1996 and 1997 Federal income tax           
          returns.  With respect to the main house, respondent allowed                
          depreciation for the third floor units only.  Respondent                    
          determined depreciation by allocating one third of petitioners’             
          $125,000 purchase price for the land and improvements to the                
          third floor units.  Respondent also allowed petitioners to                  
          increase their basis by $40,000 for renovations to the third                
          floor units and to depreciate the furniture and fixtures in the             
          units purchased at a cost of $25,000.  With respect to                      
          depreciation for the carriage house, respondent determined the              
          percentage of petitioner’s cost basis attributable to the                   
          carriage house based on its total square footage as a percentage            
          of the square footage of the main house.  Respondent then                   
          calculated allowable depreciation by attributing that percentage            
          of petitioner’s $125,000 purchase price to the business use of              

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  Next

Last modified: May 25, 2011