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III. Issue 3. 1991 Capital Gains
A. Background
A two-story structure was constructed in Miami, Florida
(Miami property), during 1984. Eureka Field Nursery, Tropstock,
and Kiddies 50 Corp. (corporations) were to share the
construction costs of the Miami property, which combined office
and residential space.
The corporations resolved that the expenses of building the
structure would be allocated as follows:
Corporation Percentage of Expenses
Eureka Field Nursery, Inc. 47.5
Tropstock, Inc. 47.5
Kiddies 50 Corp. 5.0
Additionally, the corporations resolved that the three
corporations could demand contributions from Farm & Grove or any
other entity which used the facilities.
In order to facilitate the construction of the structure,
petitioner obligated himself as mortgagor to AmeriFirst Mortgage
Co. as mortgagee, in the amount of $214,000.
On Eureka Field Nursery’s 1985 Form 1120S, it claimed a
depreciation allowance of $16,555.04 on the property. The
accompanying depreciation schedule reports a cost basis in the
structure of $446,985.19 and an 18-year recovery period. Eureka
Field Nursery used the straight-line method of depreciation in
1985 in calculating its allowable depreciation deduction.
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