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and (7) a concrete manure pit. Alpha conveyed the farm to TBP in
1986, reflecting on the certified deed that the conveyance was
made in return for Alpha’s receipt of money in the amount of
$350,000. TBP made no capital improvements to the farm
afterwards.
For 1994 through 1996, petitioner filed timely individual
income tax returns, and TBP filed timely partnership returns of
income. Each partnership return claimed a $48,763 depreciation
deduction for the buildings. TBP’s 1994 return reported that the
buildings had been “placed in service” in 1986 and had a
depreciable basis of $926,500.3 TBP calculated this depreciation
using the straight line recovery method and a 19-year recovery
period. As of December 31, 1993, TBP had claimed $390,104 of
depreciation on the buildings.
Respondent determined that TBP was not entitled to deduct
any of the depreciation claimed for the subject years. As stated
in the notice of deficiency issued to petitioner (and as stated
similarly in the FPAA issued to TBP for 1994):
Thoroughbred Breeders Partnership is claiming a total
basis in the 93 acre thoroughbred horse farm as
follows:
Land $300,000
Buildings 926,500
3 TBP’s 1995 and 1996 returns claimed on their face the same
$48,763 deduction for depreciation, but provided no specifics as
to that deduction.
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Last modified: May 25, 2011