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Fencing 81,365
Track System 130,000
Furniture & Equipment 62,135
Total 1,500,000
* * * * * * *
It is determined that the depreciation expense
deductions of $48,763.00 claimed on the 1995 and 1996
partnership returns are not allowed because the
partnership claimed depreciation expenses deductions in
excess of its basis due to overvaluation of the
property. The deed for purchase of the entire farm
from Alpha Farm, Inc. on November 3, 1986 shows a
purchase price of $350,000.00 instead of $1,500,000.00
as claimed. It has not been established the
partnership completely paid $1,500,000.00 for the
property or continued to be liable for any debt to pay
such amount. Consequently, the original cost of the
asset of $350,000.00 is allowed as a basis for
depreciation. Since accumulated depreciation of
$390,104.00 previously claimed for years 1986 through
1993 exceeds the original cost, the asset is considered
fully depreciated and no additional depreciation
expenses deduction is allowable.
For 1994, 1995, and 1996, petitioner claimed on his personal
returns respective losses of $35,654, $29,376, and $62,709 as
passthrough items from Calvary. Respondent determined that
petitioner had insufficient basis in Calvary to deduct any of
these losses. On or about July 15, 1993, petitioner borrowed
$250,000 from Fleet Bank and transferred this money to Calvary
either as a loan from him to Calvary or as a contribution to its
equity. On June 17, 1996, Fleet filed a lawsuit against
petitioner for the $250,000, plus interest, late fees, collection
costs, and attorney’s fees, alleging that petitioner failed to
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Last modified: May 25, 2011