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little to no value and that petitioner bought the Property
solely, or primarily, for the land.
There is substantial independent evidence demonstrating that
respondent’s basic premise, that the buildings had little to no
value when acquired, is wrong. A loan officer for the bank
extending a $500,000 loan for petitioner’s purchase of the
Property recommended approval of the loan, on the grounds that
the buildings, although “old” and in “need of repair”, could be
rehabilitated to produce rental income to service the debt.
Moreover, in 1993 an unrelated insurer issued a policy providing
$852,000 in coverage for the buildings, and there was no evidence
of substantial capital improvements to the buildings between the
time of their acquisition by petitioner in 1988 and the issuance
of the policy. We believe it is unlikely an insurer would have
extended coverage of this magnitude for buildings of negligible
value. In addition, the land contained steep slopes and a flood
plain and was subject to maintenance and access easements held by
petitioner’s neighbor, the combination of which would suggest
that any attempt to use the land in a configuration other than
the one existing at the time would require considerable capital
investment. Given the lack of evidence of relative value offered
by respondent, we conclude that respondent has failed to carry
his burden of showing that petitioner is not entitled to the
depreciation deduction in the amount claimed on the 1994 return.
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