John N. Shelton, Jr. - Page 8

          applicable convention is the midmonth convention.                           
               Petitioner claimed a depreciation deduction of $1,737 for              
          the rental property for each year in issue computed as follows:             
          Month and Year              Recovery                                        
          Placed in Service   Basis      Period      Convention    Method   Deduction 
          11/89        $47,764   27.5 years       M/M          S/L      $1,737        
               Petitioner’s computations are correct and comport with the             
          statute.  However, petitioner used the purchase price of $47,764,           
          as his basis for depreciation purposes, which price includes both           
          land and building.  The allowance for depreciation in the case of           
          tangible property does not apply to land.  Sec. 1.167(a)-2,                 
          Income Tax Regs.                                                            
               Petitioner is entitled to a depreciation deduction for each            
          year.  Upon the basis of the record, we find the value of the               
          land to be $10,000, leaving petitioner with an adjusted basis for           
          depreciation of $37,764.  Thus, under section 168 petitioner is             
          entitled to a depreciation deduction of $1,373 for each taxable             
          year in issue.                                                              
               Reviewed and adopted as the report of the Small Tax Case               
                                                  Decision will be entered            
                                             under Rule 155.                          

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