- 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 ofPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011