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home. That loss comprised the $3,900 claim for depreciation and
$3,405 of other expenses, including utilities, land rent, etc.
In his answer to the petition, respondent alleged “that, if the
mobile home is held for the production of income, the property
should be depreciated as 27.5-year class residential real
property under MACRS [modified accelerated cost recovery system]
rather than as 10-year property under ACRS [accelerated cost
recovery system].”
The parties stipulated that the acquisition cost of the
rental home was $36,000. At trial, petitioner’s uncontroverted
and believable testimony reflected that significant improvements
were made to the home, including the removal of wheels and axles,
placing it on foundation blocks, securing it with steel straps
attached to ground anchors, adding a 12- by 24-foot deck, a
concrete perimeter, a storage area, electrical wiring, a water
system, a boathouse, a deck, and an electric lift. In addition,
petitioner’s uncontroverted testimony was that the improvements
cost $3,100.5 Petitioner, as owner of the property, testified
that the value of the home and the improvements was at least
$39,100 in 1991, the first year it was rented. See sec.
1.167(g)-1, Income Tax Regs. Petitioner testified that no
5 Although petitioner testified that the cost of the
improvements was $3,100, for 1996 the depreciation claimed was
$3,900, which would indicate $3,000 rather than $3,100 of
improvements. See also supra note 4.
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